Tax changes: What you need to know

A three-week late start to the IRS tax filing season was only one of many changes we would see in the 2020 tax season affecting taxpayers this year. Below is a list of other changes and information to be aware of, even for some filers who have already filed their returns.

• Stimulus Payments

Many taxpayers received the first of three payments in the spring of 2020. The second one that went out to taxpayers the first of the year in 2021 was included in the Recovery Rebate Credit calculation, an advance of new credit for 2020. The third stimulus payment that many taxpayers recently received and are still waiting for is a $1400 payment for qualified taxpayers and will be reconciled on the 2021 tax returns. Those not getting all or a portion, but qualify based on their 2020 returns, may be entitled to an additional credit when filing.

• Taxable Unemployment Benefits

March brought several midseason changes that affect many current and already filed returns. For individuals and married couples making less than $150,000 adjusted gross income, up to $10,200 of benefits are excludable from federal taxable income. The same does not apply to Idaho State. Idaho requires these benefits to be added back to taxable income for state filing purposes. The IRS expects to send refunds out beginning in May for the adjustment to already filed returns, having included a nontaxable portion of unemployment benefits. No amended return is required.

• Excess Premium Tax Credit

Some may have been eligible for Advance Premium Tax Credit to aid in the cost of health insurance premiums through the Affordable Care Act. If more credit was received than qualified for, taxpayers are typically required to pay this back. With the changes announced mid-March, this is yet another item that may affect already filed returns. The IRS has not yet announced how they will be handling the correction to returns already submitted but has stated more information is forthcoming and to not submit an amended return at this time.

• Child Tax Credit

This is a change specific to 2021 returns but some may see benefit in the upcoming months. The credit for children under 18 (also a change from the previous age of 17) will increase from $2000 per qualifying child to $3000. For any child under 6, the credit will go up to $3600. It is unclear yet, how the IRS will roll this out, but they are expecting to be able to make a portion of this 2021 tax credit payable in monthly installments as an advance credit in the coming months.

• Income Excluded from Tax

While the feds announced mid-March that there would be certain income excludable from tax, Idaho state took a few weeks longer to inform which items they would conform to. Income from SBA Loans forgiven (Paycheck Protection Program), SBA Economic Injury Disaster Loans, EIDL grants and Advanced Recovery Rebate Credit (stimulus payments) are all exempt from tax at both the federal and state level. Rebound Idaho grants of up to $10,000 are includable in federal income but exempt from Idaho. This and the PPP loans forgiven were a late decision conformity by Idaho, and an amended return may need to be filed if you had any of these items before the March 23 announcement by Idaho.

• Tax Filing Deadline

A final and essential change was the IRS approval of a filing and payment extension of time to May 17 for the 2020 tax season only and only for individual 1040 filers. This change also recently was extended to deadlines to make contributions to Individual Retirement Accounts (IRA) and Health Savings Accounts (HSA). This new deadline does not apply to non-1040 filers such as corporations, estate, and trust returns, nor does it apply to estimated payments due April 15th. Idaho State Tax Commission announced on March 25 that they would also be adhering to the filing deadline change of May 17th. This change also applies to Property Tax Reduction (circuit breaker) applications normally due April 15th.

The 2021 returns will see some additional changes to tax rules surrounding Earned Income Credit, Dependent Care Credit, Premium Tax Credit, as well as many other areas too numerous to list here. If you have questions on how these or any other changes may affect you or if you believe you may need to amend a return due to some of the changes above, contact your CPA or tax preparer professional for assistance.

Deborah Youngwirth is a certified public accountant at Youngwirth Davis & Associates and is located at 7193 Main St, Bonners Ferry, ID 83805. You can call at (208) 267-5166.