File A Tax Return To Claim A Missing Stimulus Payment
The 2020 tax season is different because of the two stimulus checks given out by the federal government. If you think you are owed stimulus money, you may need to file a tax return to claim the Recovery Rebate Credit. Consumers who are eligible for the Recovery Rebate Credit and did not receive the first or second round of stimulus payments must file a 2020 tax return to claim their missing cash.
You might be eligible to claim the Recovery Rebate Credit if you lost income or your income was reduced in 2020 youre a college student that was claimed as a dependent in 2018 or 2019 but are no longer a dependent in 2020, or you gave birth to or adopted a child.
You should also file a return if youre expecting a tax refund or if youll receive one of the many credits available, such as refundable credits, earned income credit, additional child tax credit, American opportunity credit, recovery rebate credit or credits for sick and family leave, says Brent Lipschultz, a partner and CPA at New York-based tax and accounting firm EisnerAmper.
Many peoples situations changed in 2020 and they may be entitled to additional stimulus payment amounts, she says.
If youre a taxpayer who had taxes withheld during 2020, but are not required to file a tax return, the only way you will receive those withholdings back is by filing a return, Curtis says.
Do Minors Have To File Taxes
Minors will have to file taxes if their earned income is greater than $12,550 . If your child only has unearned income, then the threshold is $1,100 . If they have both earned and unearned income, then it is the greater of $1,100 or their earned income plus $350. If the minor is self-employed, they will have to pay Self-Employment Tax at and above $400.
When Your Child Should File
Your child should file a federal income tax return even though it isn’t required for the reasons above, if:
- Incomes taxes were withheld from earnings
- They qualify for the earned income credit
- They owe recapture taxes
- They want to open an IRA
- You want your child to gain the educational experience of filing taxes.
In the first two cases, the main reason for filing would be to obtain a refund if one is due. The others are income-dependent or based on taking advantage of an opportunity to begin saving for retirement or to begin learning about personal finance.
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How Much You Have To Make Based On Filing Status
So are you planning on filing single , married filing jointly, married filing separately or head of household? Let’s break them all down.
Single: If you are single and under the age of 65, the minimum amount of annual gross income you can make that requires filing a tax return is $12,200. If you’re 65 or older and plan on filing single, that minimum goes up to $13,850.
How much you have to make if you’re married and filing jointly will depend on the age of both you and your spouse, generally coming out to double what someone filing single would require. If both spouses are under 65, you need to make at least $24,400. If both spouses are 65 or older, you will have to make a minimum of $27,000. If just one of you is 65 or older, split the difference you need to make $25,700.
Qualifying Widower: If you are a qualifying widower with a dependent child, you are also able to file as married filing jointly, and the age disparity still applies: at least $24,400 if you’re under 65, at least $25,700 if you’re 65 or older.
Those who are married and filing separately, interestingly, only require a gross income of $5 to have to file a tax return.
Head of household: If you qualify for head of the household status and look to file as such, you have to file a tax return if you make $18,350 or more under the age of 65. If you are 65 or older, that number is $20,000 in gross income.
Expect Delays This Tax Season
Like in 2021, it could take longer than usual to receive your tax refund this year.
I think the IRS has done a service by warning people upfront about what the process is going to be like this year, says , a senior fellow at Urban-Brookings Tax Policy Center. But its not the position that anyone would want their tax agency to be in.
Advance Child Tax Credit payments, stimulus checks, and other changes to the tax code as a result of the pandemic will drive this years delays, Holtzblatt says.
The best way to avoid delays is by using direct deposit to get your tax refund faster and avoid errors in your return.
Its critical this year to avoid a paper tax return whenever possible and file electronically with direct deposit, IRS Commissioner Charles Rettig recently said in a statement. And its more important than ever to make sure youre filing an accurate tax return.
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When Will I Get The Recovery Rebate Credit
You will most likely get the Recovery Rebate Credit as part of your tax refunds. If you electronically file your tax return, you will likely receive your refund within 3 weeks. If you mail your return, it can take at least 8 weeks to receive your refund.
Claiming the Recovery Rebate Credit will not delay your tax refund. However, if you dont claim the correct amount of the Recovery Rebate Credit, your refund may be delayed while the IRS corrects the error on your return. The IRS will send you a notice of any changes made to your return.
You can check on the status of your refund using the IRS Check My Refund Status tool.
The Earned Income Tax Credit
The EITC is a refundable tax credit worth up to $6,728 for low- and moderate-income workers. The credit amount is based on how many children you claim up to three or more although you can still file if you have no children. In the case of no qualifying children being claimed, the payout is $1,502.To receive this credit, your qualifying adjusted gross income has to be below certain thresholds, based on how many qualifying children you are claiming. But you don’t have to worry about that if you don’t earn enough to justify a tax return your AGI is low enough to qualify for the full credit, whether you have kids or not.
There are some other eligibility requirements, too, but your best bet is using the IRS’EITC Assistant to determine whether you qualify. The claim for this credit is made in your tax return using the Schedule EIC.
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File A 2020 Tax Return If Youre Missing Stimulus Payments And Think Youre Eligible For More Money
I know many people have questions about tax law changes related to the American Rescue Plan Act of 2021. I urge you to start with IRS.gov Coronavirus Tax Relief to find the most updated information when its available. If youre looking for general information, the best place to start is IRS.gov. It will save you time because our employees wont be able to provide much more information if you call.
Economic Impact Payments, also known as stimulus payments, are different from most other tax benefits. Thats because people can get them even if they have little or no income, and even if they dont usually file a tax return. This is true as long as you are not being claimed as a dependent by someone else and you have a Social Security number. When it comes to missing stimulus payments, its critical that you file a 2020 tax return even if you dont usually file to provide information the IRS needs to send the payments for you, your eligible spouse and eligible dependents.For anyone who missed out on the first two rounds of payments, its not too late. If you didn’t get a first and second Economic Impact Payment or got less than the full amounts, you can get that missing money if youre eligible for it, but you need to act. All first and second Economic Impact Payments have been sent out by IRS. If your 2019 tax return has not been processed yet, the IRS wont send you the first or second payment when it is.
Coronavirus Unemployment Benefits And Economic Impact Payments
You may have received unemployment benefits or an EIP in 2020 due to the COVID-19 pandemic.
Unemployment compensation is considered taxable income. You must report unemployment benefits on your tax return if you are required to file.
If you received the EIP, you do not need to report it as income whether youre required to file a tax return or not. If you did not receive some or all of your stimulus payments, you may claim missing stimulus money that you are owed by filing for a Recovery Rebate Credit on your 2020 return.
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Earned Income Tax Credit
The Earned Income Tax Credit is for lower income working people. If you qualify for the credit, then you definitely want to file a tax return. The credit is “refundable,” meaning that if it’s worth more than the income tax you owe, the IRS will issue you a refund check for the difference. The EITC is the first of several refundable credits that we’ll discuss.
For 2020 tax returns, the maximum EITC ranges from $538 to $6,660 depending on your income and how many children you have. So, it’s well worth the time it takes to complete a tax form if you qualify for the credit.
The income limits to qualify for the EITC are fairly low. For example, if you don’t have kids, you can qualify if your 2020 earned income and adjusted gross income are each less than $15,820 for singles and $21,710 for joint filers. If you have three or more children and are married, though, your 2020 earned income and AGI can be as high as $56,844 . Plus, you can use your earned income from 2019 to determine the EITC for the 2020 tax year if it results in a higher credit amount. There are many exceptions and other rules, but the IRS has a handy online tool to help you figure out if you’re eligible for the credit.
For temporary changes to the 2021 EITC, see 6 Biden Stimulus Benefits That Pack the Biggest Punch.
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What Happens If You Dont File Taxes
If you need to file taxes but choose not to, the IRS has several means for bringing you to the table. Actions include, but are not limited to, assessing penalties, fines and interest enforcing tax liens, or more severe measures, for evading any taxes you might owe.
If you fail to file your taxes on time, youll likely encounter whats called a Failure to File Penalty. The penalty for failing to file represents 5% of your unpaid tax liability for each month your return is late, up to 25% of your total unpaid taxes.
If youre due a refund, theres no penalty for failure to file. Though, you do lose the chance of getting that refund. You have a limited period to claim that refund as well. If you havent filed an original return within 3 years of its due date for a refund, you’ve missed the statute of limitations entitling you to the chance of claiming that refund.
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Four Factors That Impact Income Thresholds
Four factors determine whether you must file, and each circumstance has its own gross income threshold. The four factors are:
- Whether someone else claims you as a dependent
- Whether you’re married or single
- Your age
Some of these factors can overlap, which can change the income thresholds for required filing.
Consider Your Gross Income Thresholds
Most taxpayers are eligible to take the standard deduction. The standard tax deduction amounts that you’re eligible for are primarily determined by your age and filing status. These amounts are set by the government before the tax filing season and generally increase for inflation each year.
The standard deduction, along with other available deductions, reduces your income to determine how much of your income is taxable. As long as you don’t have a type of income that requires you to file a return for other reasons, like self-employment income, generally you don’t need to file a return as long as your income is less than your standard deduction.
For example, in 2021, you don’t need to file a tax return if all of the following are true for you:
- Under age 65
- Don’t have any special circumstances that require you to file
- Earn less than $12,550
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Setting Up A Payment Arrangement
If you are not be able to pay your balance in full before the deadline, dont worry! The CRA can help you set up a payment arrangement to pay your balance in several regular payments over a period of time.
Calculating your payments
The CRA will work with you to find the best way to pay your balance without creating more financial difficulties for you. Your payment arrangements will be based on what you can afford to pay.
Even if you have set up a payment arrangement, the CRA will still charge interest on your unpaid balance until you pay it in full. Your payment arrangement should include an estimated amount of interest.
If you want to set up a payment arrangement, you can first use the CRAs online payment arrangement calculator. You can then call the automated TeleArrangement service or speak to a CRA agent.
Respecting the arrangement
If you have set up a payment arrangement, it is important to make all of your payments on the arranged dates.
You must also file your future tax returns on time.
If your situation changes and you cannot make a payment, you should contact the CRA right away.
How Much Can A Small Business Make Before Paying Taxes
If you operate a small business, you must pay taxes on the income, regardless of the profit and loss. The tax return you must file depends on how your business is structured. For example, if you have a sole proprietorship youll file the schedule C with your personal tax return.
If youre a freelancer, you must also pay self-employment taxes for income more than $400. These taxes cover Medicare and social security taxes.
Sole proprietors must file IRS Form 1040, Schedule C and Schedule SE if your net income is greater than $400. If you have an employee, you will need to withhold federal and state income taxes and Social Security and Medicare taxes for each employee.
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Income Too Low To File Taxes You May Still Be Eligible For A Stimulus Check
Economic stimulus checks are prepared for printing at the Philadelphia Financial Center.
The government recently passed the Coronavirus Aid, Relief and Economic Security Act, which will provide stimulus checks to qualifying individuals. Eligibility for the stimulus checks is based on your income from your 2019 tax return or your 2018 tax return if you havent filed your 2019 return yet.
But what if you dont file a tax return because you either dont have enough income, or all of your income comes from Social Security Disability or a non-taxable benefits program such as Supplemental Security Income or VA disability compensation?
The good news is you will still qualify for the stimulus checks if your sole source of income comes from one or more of these sources and falls under the income limits set by the CARES Act.
However, if you havent filed a tax return in either 2018 or 2019, then you may need to first file a tax return so the government will be able to identify you as qualifying for this benefit.
Qualifying for the 2020 Stimulus Check
The 2020 stimulus check is based on the Adjusted Gross Income from your most recent tax return. If you have already filed your 2019 tax return, the IRS will use that information. Otherwise, they will use the AGI from your 2018 tax return.
Other Options For Paying Your Balance
There are other options available for you to make a payment if you cannot make a payment online.
These options usually require you to have a remittance voucher. A remittance voucher is a slip that gives the CRA information about your account to process your payment.
If you need a remittance voucher to pay your balance owing, you can:
- print one from Canada.ca
- request one through My Account
- request one by calling the CRA
Fast fact
You cannot make a payment in person at a CRA office, because there is no walk-in counter service.
You can make a payment in person at a Canadian financial institution. This method usually requires you to have a remittance voucher. Some financial institutions can process an electronic payment for you in person.
You can pay with cash or a debit card at any Canada Post outlet across Canada. You will need a QR code that provides information about your account. The CRA includes this QR code on some remittance vouchers. If you need to create a QR code, Canada Post will use a third-party service provider to process the code.
You can make a payment to the CRA with a cheque from your Canadian financial institution. You should make the cheque payable to the Receiver General for Canada and mail it to the CRA with a remittance voucher.
Resources are available
After you finish this lesson, these resource links will be available:
- Pay in person
You should always allow enough time for the CRA to process your payment before following up.
Resources are available
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