Can I file my taxes for free?
You can! The IRS partners with several industry-leading tax prep companies to offer free e-filing. Depending on your income, you may be eligible to use these name-brand tax software products to file both federal and state income tax returns for free. Visit the IRS website for more details.
Is unemployment taxed?
At the federal level, yes, unemployment benefits are taxed just like wages. UPDATE: As part of the American Rescue Plan passed in mid-March 2021, the federal government is waiving income tax on the first $10,200 in unemployment benefits received in 2020 (for people with incomes under $150,000).
At the state level, it depends on the state. Many states tax the benefits just like the federal government. Some tax only part of the benefit, and some states don’t have state income tax, so they don’t tax any part of the benefit. Here is a state-by-state guide to unemployment taxes.
Just like a traditional paycheck, you can choose to have tax withheld from your unemployment check to cover your federal tax bill. If you did notwithhold taxes from your unemployment benefits, you will have to pay the taxes when you file your return. The IRS website has more information about how this works.
Will the stimulus checks affect my taxes?
No. According to the IRS “the payment(s) is not income and taxpayers will not owe tax on it. The payment will not reduce a taxpayer’s refund or increase the amount they owe when they file their 2020 or 2021 tax return the next year.”
This has caused a bit of confusion because both the April and December stimulus checks are what is known as a Recovery Rebate Credit. A tax credit reduces your overall tax bill, but can’t turn into a refund. The Recovery Rebate Credit is a refundable tax credit, which means it can become a refund. So if your overall tax liability is less than the credit, you are refunded the difference. Because of the pressing financial realities of the pandemic, the government gave eligible Americans these tax credits early.
Can I quality for a stimulus check once I file my 2020 taxes?
Yes! Many people’s income in 2019 was too high to qualify for stimulus checks, but their 2020 incomes were significantly lower. The IRS didn’t know that yet when the stimulus checks were sent out. But that can be remedied when you file your taxes this year.
On the 2020 tax forms, there will be a section to report the amount of stimulus you received this year and to calculate if you are owed more. Examples might include if you were furloughed or laid off, had your pay reduced, or if you had a baby in 2020.
What’s the earliest I can file my taxes?
The IRS has announced that it will start accepting returns on Feb. 12, 2021. This is a few weeks later than years past because the IRS needed additional time for planning during the pandemic.
What is the deadline to file taxes?
Traditionally, the tax deadline is April 15, but the IRS has extended the filing date until Monday, May 17, 2021. If you make quarterly tax payments, those payments are still due on April 15.
Can I file my taxes early?
Some services, like H&R Block and TurboTax, allow you to file as early as Jan. 1, but your return cannot be officially submited to the IRS until filing is open on Feb. 12, 2021. You’ll just have to wait longer to get your tax refund.
How long will it take to get my tax refund?
The IRS issued refunds for about 90% of taxpayers in less than 21 days from the date their return was received in 2020. But there are some factors that can affect how long it takes.
- The earlier you file the better. The IRS gets busy.
- E-filings will be processed faster than mailed-in returns.
- Direct deposit is always faster than having your refund mailed to you.
- Tax returns with an Earned Income Tax Credit (EITC) or a Child Tax Cred (CTC) will not be processed until starting mid-February. These credits are more often misused than others and the IRS needs extra time to verify that taxpayers qualify.
What is a tax deduction?
A tax deduction is a reduction in your taxable income. A tax deduction is different than a tax credit, which is subtracted from your overall tax burden. For more on this, check out our 11 Common Tax Deduction & Credits article.
For example, if a family’s income is $50,000 per year and they are eligible for a $500 deduction, the family will only be taxed on $49,500 in income.
What is the standard deduction in 2020-2021?
$12,400 for single filers and $24,800 for married couples filing jointly.
What is a tax credit?
A tax credit is a direct reduction in the overall amount of taxes owed. A tax credit is different than a tax deduction, which is subtracted from your taxable income.
For example, the Child Tax Cred is $2,000 per child, so a family with one child that owed $3,000 in taxes would owe just $1,000 after the Child Tax Credit.
What is the Child Tax Credit (CTC) for 2020-2021?
UPDATE: The American Rescue Plan (ARP) passed in mid-March 2021 expanded the Child Tax Credit to $3,600 for children under age 6 by the end of 2021 and to $3,000 for children 7–17. It is also now fully refundable. You can read more about the changes here.
Before the ARP was passed, the Child Tax Credit was $2,000 per qualified child 16 and younger at the end of the calendar year and $500 per qualifying dependent. Up to $1,400 is refundable.
