What to Know Before Filing your 2020 Tax Return

As Richard says, “It’s a doozy of a tax year.” The IRS will be way behind in issuing refunds, yet the deadline for filing your 2020 federal tax returns is still April 15. For most people, it will be filing as usual, but there are situations where special attention may be required. If you earned $75,000 or less ($150,000 as a couple) in 2020 and should have received a $1,200 government stimulus payment last year and a $600 payment in January but didn’t, you can claim these missing payments when you file your 2020 federal tax return. Even if you made no income last year, you still need to file if you want to claim these missing payments. If you donated to charity last year, you can deduct up to $300 in cash contributions even if you can’t normally itemize deductions. If you’re under age 59½ and took advantage of the CARES Act provision to take up to $100,000 out of your Traditional IRA or 401(k) account without early withdrawal penalties, you’ll still have to pay taxes on this withdrawal. But if you fully reinvest the amount you withdrew within the next three years, you’ll be able to request a refund for the taxes you paid. If you were one of the millions of Americans who received state unemployment benefits last year, you’ll have to pay taxes on those benefits. Unfortunately, if you were working for your employer at home last year, you won’t be able to deduct any money you paid for furniture, equipment or other job-related expenses. However, if your income declined significantly from previous years, you may qualify for tax relief. And if you’re expecting a refund or your missing stimulus payments, make sure you file electronically and allow the IRS to deposit this money into your bank account. Otherwise, you may have to wait months to receive the money you’re owed.