What you need to know about changes to the tax season
Deferred payroll taxes, unemployment impacts, waived RMD’s
TYLER, Texas (KLTV) - Everything from the pandemic to legislation has created some changes for this tax season.
Liberty tax service has been helping the people in Tyler for the past 10 years. The owner, Terri Rodgers, says their phones have been ringing off the hook with new questions, especially about stimulus payments.
“When they’re gonna get them, how do they get them. The IRS website says the payment status is unavailable, so they’re questioning what to do with that. Most likely if it states that it’s unavailable then they need to file their tax return to apply for that stimulus money,” says Rodgers.
You can do this by downloading the IRS form 1040 online. There’ll be a new line for you to file the stimulus check under “Recover Rebate Credit.”
The pandemic has also brought on an increase in unemployment. With that rise in people filing for joblessness, Rodgers says she suspects many didn’t realize unemployment is an income that has to be reported on your tax return. As a result, she’s having to tell people instead of expecting a refund, they actually owe money.
She says this is putting an even bigger burden on her clients.
“They’re really worried because money’s tight and they’re really struggling right now,” she says, “They’re upset and worried about how they’re going to pay that along with all the other normal bills that they have.”
She says if you’re still receiving unemployment you can adjust it so you can withhold taxes from that check to prevent this from happening to you.
Rodgers adds that there might be something that can help you out now. If your income was more in 2019 than 2020, your tax accountant can use that higher income to get more earned income credit. This includes those who are unemployed now since that doesn’t count toward earned income.
Last August former president Donald Trump signed an executive order to allow some Americans to defer payroll taxes. It allowed workers to keep more money in paychecks for immediate use and that executive order expired this month. Rodgers says many clients are now calling concerned because they didn’t realize they needed to withhold more from their tax return to cover their tax bill.
“I had a lady come in yesterday evening and she had a substantial amount of income,” she adds, “but very little withholdings so it affected her tax return.”
She says luckily her client was able to increase her return because she had a dependent, but that’s not the case for everyone. If it’s not already immediately taken from your income, then Rodgers suggests withholding 10% off of your paycheck to cover taxes.
Another change you can expect directly effects those getting ready for retirement. Last year as a part of Coronavirus relief, Congress waived all required minimum distributions, or RMD’s. This is the minimum amount a person saving for retirement has to withdrawal. If you kept on withdrawing that money you might be in for a lower 2020 tax bill.
Rodgers says, “there was a requirement, when you reached the age of 72 and a half that you had to take minimum distribution. Now you don’t have to take that. You can leave that money in that retirement account and not be penalized for it.”
Anyone with an RMD due in 2020 from a company plan or an IRA qualifies. That also includes beneficiaries and anyone who turned 70 and half years old in 2019 and had to take their first RMD by April 1st of last year.
According to Rodgers, it’s not always clear what changes might affect your tax refund. For a unique tax season like this one, she suggests reaching out to a professional tax accountant to be sure everything is done in order and on time with these adjustments.
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