Starting next year, online sellers who use platforms like eBay and Etsy — and make more than $600 — will have to report their income to the tax agency.
These platforms will have to send both you and the IRS a form reporting your earnings that you’ll have to submit when you file your taxes.
Here’s how that will work and how you can handle these new rules.
For more information and details Click on the link below.
IRS will recalculate taxes on 2020 unemployment benefits and start issuing refunds in May
Normally, any unemployment compensation someone receives is taxable. However, a recent law change allows some recipients to not pay tax on some 2020 unemployment compensation.
The IRS will automatically refund money to eligible people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan. These refunds are expected to begin in May and continue into the summer.
Under the new law, taxpayers who earned less than $150,000 in modified adjusted gross income can exclude some unemployment compensation from their income. This means they don’t have to pay tax on some of it. People who are married filing jointly can exclude up to $20,400 – up to $10,200 for each spouse who received unemployment compensation. All other eligible taxpayers can exclude up to $10,200 from their income.
Information for people who already filed their 2020 tax return
This law change occurred after some people filed their 2020 taxes. For taxpayers who already have filed and figured their 2020 tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation. Any resulting overpayment of tax will be either refunded or applied to other taxes owed.
The agency will do these recalculations in two phases.
- First, taxpayers who are eligible to exclude up to $10,200.
- Second, those married filing jointly who are eligible to exclude up to $20,400, and others with more complex returns.
Taxpayers only need to file an amended return if the recalculations make them newly eligible for additional federal tax credits or deductions not already included on their original tax return.
For example, the IRS can adjust returns for taxpayers who claimed the earned income tax credit and, because the exclusion changed their income level, may now be eligible for an increase in the EITC amount.
However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but are now eligible to claim them following the change in the tax law. Taxpayers can use the EITC Assistant to see if they qualify for this credit based upon their new taxable income amount. If they now qualify, they should consider filing an amended return to claim this money.
These taxpayers may want to review their state tax returns as well.
Information for people who haven’t filed their 2020 tax return
Tax preparation software has been updated to reflect these changes. People who haven’t yet filed and choose to file electronically, simply need to respond to the related questions when preparing their tax returns. These taxpayers should read New Exclusion of up to $10,200 of Unemployment Compensation for information and examples. For those who choose to file a paper return, instructions and an updated worksheet about the exclusion are available on IRS.gov.
IRS extends additional tax deadlines to May 17
Following the extension of the filing and payment deadline for individuals to May 17, 2021, the IRS announced other tax deadline extensions to the same date.
Here’s what’s affected:
Contributions to IRAs and health savings accounts
People now automatically have until May 17, 2021, to make 2020 contributions to their:
- Individual retirement arrangements
- Health savings accounts
- Archer medical savings accounts
- Coverdell education savings accounts
The deadline for reporting and paying the 10% additional tax on amounts included in gross income from 2020 distributions from IRAs or workplace-based retirement plans is now May 17, 2021. Lastly, the due date for Form 5498 series returns related to these accounts is now June 30, 2021,
2017 unclaimed refunds The law provides a three-year window to claim a refund. Normally, April 15, 2021, is the deadline to claim a refund from tax year 2017 but, the IRS has extended it to May 17, 2021. To get the unclaimed refund, a taxpayer must properly address and mail the tax return, postmarked by May 17, 2021. If a taxpayer doesn’t file a return within three years, the money becomes property of the U.S. Treasury.
Foreign trusts and estates Foreign trusts and estates with federal income tax filing or payment obligations, who file Form 1040-NR, now have until May 17, 2021.
2021 Annual Filing Season Program application deadline Tax return preparers who’d like to participate in the Annual Filing Season Program for calendar year 2021 now have until May 17, 2021, to file their application with the IRS.
Tax professionals can learn more on the AFSP page on IRS.gov.
No extension for estimated tax payments April 15, 2021 is still the deadline to make first quarter estimated tax payments. Withholding is automatic for most employees, but some taxpayers’ income isn’t subject to income tax withholding. These taxpayers must generally make quarterly estimated tax payments. Income that may require estimated tax payments includes:
Taxpayers should review IRS Notice 2021-21 for more information about these extensions.
IRS issuing third Economic Impact Payments to non-filers and most federal beneficiaries
The IRS continues to issue the third Economic Impact Payment to eligible individuals. This includes Social Security recipients and other federal beneficiaries who do not normally file a tax return. Most of these payments will be sent electronically and received on April 7.
Most of these payments will be sent electronically – by direct deposits or to existing Direct Express cards – they should arrive on the official payment date of April 7.
This round of third payments applies to eligible Social Security retirement, survivor or disability, Supplemental Security Income, and Railroad Retirement Board beneficiaries who don’t file tax returns. In addition, many federal beneficiaries who filed a 2019 or 2020 tax return or used the Non-Filers tool last year were issued Economic Impact Payments, if eligible, during the last three weeks, along with other taxpayers.
These beneficiaries can use the Get My Payment tool to find out when and how the payment was issued.
Payments are automatic for most people
Most Social Security retirement and disability beneficiaries, railroad retirees and recipients of veterans benefits who are eligible for the third EIP don’t need to take any action to receive a payment. They will generally receive this third payment the same way that they receive their regular benefits.
The third payment will be automatic for eligible beneficiaries. However, some people may need to file a 2020 tax return even if they don’t usually file. This will provide the information the IRS needs to send a third payment for a spouse or any qualified dependent. Eligible benefit recipients can file a 2020 tax return to receive a third payment for their eligible spouse or dependent even if they have already received their own third payment.
When someone files their 2020 tax return, they may also be eligible to claim the 2020 recovery rebate credit for their spouse and any qualifying children who were under age 17 at the end of 2020. People can visit IRS.gov for details about claiming the 2020 recovery rebate credit if they aren’t required to file a tax return. The third payment is not claimed on the 2020 tax return or used to calculate the 2020 recovery rebate credit.
People who don’t normally file a tax return but need to file one for 2020 and have income of $72,000 or less, can file electronically using IRS Free File. The IRS will continue to issue third payments throughout the year as tax returns are processed.
Watch mail for checks or EIP Cards
The form of payment for the third EIP may be different for some people including Social Security and other federal beneficiaries. More people are receiving direct deposits, while those receiving payments in the mail may receive a paper check or a prepaid debit card called an EIP Card. Eligible people can check Get My Payment to see how their payment will be issued.
More details on this third round of EIP and federal benefit recipients are available on the frequently asked questions page on IRS.gov.