IRS announces Filing Season Open Date
The Internal Revenue Service (IRS) has announced that tax season will open on Friday, February 12, 2021. Yes, on a Friday.
The IRS will begin accepting paper and electronic tax returns that day. This is about two weeks later than had been expected. The delay allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes – especially those involving a second round of stimulus checks (Economic Impact Payments, or EIPs).
Recovery Rebate Credit
The Recovery Rebate Credit is authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the COVID-related Tax Relief Act. It is a tax credit against your 2020 income tax. Generally, this credit will increase the amount of your tax refund or decrease the amount of the tax you owe.
Look Back Adjustment for EIC and Child Tax Credit
The new COVID-19 relief package provides a “lookback adjustment” for both the Child Tax Credit and the Earned Income Tax Credit. Both tax credits phase in as taxpayers earn more income. Since many taxpayers may have lost income in 2020, that may have reduced the number of credits they are eligible for when they file taxes in the spring.
The lookback rule will help taxpayers prevent this loss of tax credit by allowing 2019 income to be used to determine an individual’s credit eligibility for the 2020 tax year.
You can take which every credit is greater using 2019 or 2020 income.