The last BUZZ until mid-April (after the 2021 tax season).
* There is a new “wrinkle” to the Earned Income Credit for 2020. Kelly Phillips Erb explains the EIC in detail in “Here’s What You Need To Know About The Earned Income Tax Credit In 2021”.
The post identified the new wrinkle – “as part of COVID-related tax relief, you can elect to use your 2019 earned income to figure the EITC for 2020 if your 2019 earned income is more than their 2020 earned income.
* Speaking of the Earned Income Credit - there will be a delay in processing returns in the following circumstances:
- The taxpayer uses 2019 income to calculate the 2020 Earned Income Credit and/or Additional Child Tax Credit, as per the latest stimulus package. The IRS must verify that the amount of 2019 income reported on the 2020 return matches what was reported on their 2019 return.
- The taxpayer claims the Recovery Rebate Credit on their 2020 federal return. The IRS must verify the amount of EIPs sent to the taxpayer match the amounts reported on the 2020 return.
Apparently, the amount of delay depends on the number of returns that are being processed at any one time.
There are always delays in issuing refunds on returns that include the EIC and the ACTC, due to the PATH Act.
Refunds in general will be delayed this year, regardless of what is claimed on the return, as the IRS will not begin to process returns until February 12th this year.
And IRS processing of 2019 returns and calendar year 2020 correspondence is still be backed up. It is more important than ever to carefully review IRS correspondence – much is wrong and based on outdated information. Be sure to give/send your tax preparer any correspondence you get from “Sam” immediately.
* Andy Ives discusses “'Compensation for IRA Eligibility” – what does and does not qualify – at THE SLOTT REPORT.
* William Perez has a wealth of information at THE BALANCE. Click here and scroll down a bit to check out the posts listed under “Latest From William Perez, EA”.
* No BUZZ would be complete without something from Kay Bell, the yellow rose of taxes, author of the DON’T MESS WITH TAXES blog. In a recent post Kay talks about “Tax tips for members of the U.S. military”.
THE LAST WORD