The right to confidentiality is a fundamental right of all taxpayers
Information a taxpayer gives the IRS won’t be shared with outside parties, unless allowed by the taxpayer or by law. This is the right to confidentiality. It’s one of ten rights known collectively as the Taxpayer Bill of Rights.
The right to confidentiality means:
- The IRS won’t give any information to a third party without permission from the taxpayer.
- The agency can’t contact third parties such as an employer or bank for information unless they give the taxpayer reasonable notice first.
- The same confidentiality a taxpayer has with an attorney also applies to tax professionals working with the IRS on the taxpayer’s behalf.
- Taxpayers have the right to expect appropriate action will be taken against employees, return preparers and others who wrongfully use or disclose taxpayer return information.
Confidential communications include conversations, messages, documents, and info that:
- Fall within the tax professional’s authority to practice before the IRS, but it doesn’t include tax return preparation.
- Are considered private or restricted between the taxpayer and their attorney.
- Relate to noncriminal tax matters with the IRS or noncriminal tax cases in federal court.
Tax professionals can’t share or use tax information for any reason other than preparing a return.
Melissa Van, Enrolled Agent
Owner, AABS Inc.
New Exclusion of up to $10,200 of Unemployment Compensation
If your modified adjusted gross income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation.
The exclusion should be reported separately from your unemployment compensation. See the updated instructions and the Unemployment Compensation Exclusion Worksheet to figure your exclusion and the amount to enter on Schedule 1, lines 7 and 8.
The instructions for Schedule 1 (Form 1040), line 7, Unemployment Compensation, are updated to read as follows.
Line 7 – Unemployment Compensation
You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you in 2020. Report this amount on line 7.
Caution. If the amount reported in box 1 of your Form(s) 1099-G is incorrect, report on line 7 only the actual amount of unemployment compensation paid to you in 2020.
Note. If your modified adjusted income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021 excludes from income up to $10,200 of unemployment compensation paid to you in 2020. For married taxpayers, you and your spouse can each exclude up to $10,200 of unemployment compensation. For example, if you were paid $20,000 of unemployment compensation and your spouse was paid $5,000, report $25,000 on line 7 and report $15,200 on line 8 as a negative amount (in parentheses). The $15,200 excluded from income is $10,200 for you and all of the $5,000 paid to your spouse. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation. Use the Unemployment Compensation Exclusion Worksheet to figure your modified AGI and the amount you can exclude.
If you made contributions to a governmental unemployment compensation program or to a governmental paid family leave program and you aren’t itemizing deductions, reduce the amount you report on line 7 by those contributions. If you are itemizing deductions, see the instructions on Form 1099-G.
Caution. Your state may issue separate Forms 1099-G for unemployment compensation received from the state and the additional $600 a week federal unemployment compensation related to coronavirus relief. Include all unemployment compensation received on line 7.
If you received an overpayment of unemployment compensation in 2020 and you repaid any of it in 2020, subtract the amount you repaid from the total amount you received. Enter the result on line 7. Also enter “Repaid” and the amount you repaid on the dotted line next to line 7. If, in 2020, you repaid more than $3,000 of unemployment compensation that you included in gross income in an earlier year, see Repayments in Pub. 525 for details on how to report the payment.
Tip. If you received unemployment compensation in 2020, your state may issue an electronic Form 1099-G instead of it being mailed to you. Check your state’s unemployment compensation website for more information.
How Filing Taxes Will Be Different Because Of The Coronavirus
Is unemployment money taxable? What about my stimulus checks?
Tax Day is April 15, and COVID-19 has changed a lot when it comes to filing this year. Here are five things to know about how filing taxes for 2020 will be different because of the pandemic.
Listen to the full Life Kit episode at the top of this page for more about filing for the first time and getting all of your paperwork ready.
If you received unemployment checks:
Due to the pandemic and its economic repercussions, a record 23.1 million Americans filed for unemployment in April 2020. Many were without a job for the first time.
If you filed for unemployment you’ll be receiving this form: the 1099-G. This form lists the total amount of unemployment benefits you received and any amount you had withheld, says Kemberley Washington, a New Orleans-based Certified Public Accountant and financial expert with Forbes Advisor.
Normally, unemployment checks are considered taxable income. But under President Biden’s new stimulus package, the first $10,200 of unemployment benefits will not be taxed for people who make less than an adjusted gross income of $150,000. If you received unemployment benefits exceeding $10,200, “you will have to report this amount on your tax return, unless you’re not required to file a tax return,” says Washington.
If you’re wondering if you’re required to file a tax return, here’s what you need to know: Generally, you don’t have to file taxes if you’re a single individual under 65 who makes less than $12,400 dollars a year — or you’re married, under 65, filing jointly, and earn less than $24,800 a year, Washington says. (There are some other thresholds you might have to adhere to, so if you’re unsure, this IRS form can help. Here’s more information.)
If you received stimulus checks:
Good news: stimulus checks are not taxable. You do not have to pay taxes on any stimulus money you received.
Also under Biden’s stimulus package, a third round of stimulus checks will be going out. The IRS will use your 2019 or 2020 tax returns, whichever is on file, to determine your eligibility. Technically it’s an advance tax credit for 2021, but if you end up making more than the income threshold in 2021, “you won’t have to pay the money back,” says Washington. For most recipients, the latest checks will be for $1,400.
The first two rounds of stimulus checks were based on 2019 tax returns (or even 2018 tax returns, if you didn’t file taxes in 2019, Washington says). If your circumstances changed since you filed those taxes, you might be eligible to receive past stimulus checks retroactively. Or if, for example, “you’re a college student and previously you were claimed as a dependent, then you might be entitled to additional stimulus payment,” Washington says. “Or if you are a family who had … a child or adopted another child.” If your circumstances changed, you can claim the Recovery Rebate Credit on your tax forms.
If you have children:
If you moved states during the pandemic, remember to file tax returns in both states. The requirements for filing differ from state to state, so make sure you’re clear about what you need for each. “Contact both state tax agencies and determine … your filing requirement,” says Washington. Depending on your circumstances, you may need to clarify whether your move during the pandemic has been temporary or permanent. That may affect how and where you file.
If you’re working from home:
Before the Tax Cuts and Jobs Act of 2017, under President Trump, you could deduct things like your internet or electricity bill if you had to work from home sometimes, for your employer. But you cannot deduct these expenses anymore.
That’s bad news for all the people who had to relocate from their offices to their living room. However, if you’re self-employed or you have a side gig, like driving for Uber or freelancing, you can deduct certain work-related expenses on your tax return.
Here’s how people can request a copy their previous tax return
Taxpayers who didn’t save a copy of their prior year’s tax return, but now need it, have a few options to get the information. Individuals should generally keep copies of their tax returns and any documents for at least three years after they file.
If a taxpayer doesn’t have this information here’s how they can get it:
Ask the software provider or tax preparer
Individuals should first check with their software provider or tax preparer for a copy of their tax return.
Get a tax transcript
If a taxpayer can’t get a copy of a prior year return, then they may order a tax transcript from the IRS. These are free and available for the most current tax year after the IRS has processed the return.
To protect taxpayers’ identities, this document partially hides personally identifiable information such as names, addresses and Social Security numbers. All financial entries, including the filer’s adjusted gross income, are fully visible. People can get them for the past three years, and they need to allow time for delivery.
Here are the three ways to get transcripts:
- Online. People can use Get Transcript Online to view, print or download a copy of all transcript types. They must verify their identity using the Secure Access process. Taxpayers who are unable to register or prefer not to use Get Transcript Online may use Get Transcript by Mail to order a tax return or account transcript type. Taxpayers should allow five to 10 calendar days for delivery.
- By phone. Taxpayers can call 800-908-9946 to request a transcript by phone. Transcripts requested by phone will be mailed to the taxpayer.
- By mail. Taxpayers can complete and send either Form 4506-T or Form 4506-T-EZ to the IRS to get one by mail. They use Form 4506-T to request other tax records: tax account transcript, record of account, wage and income and verification of non-filing. These forms are available on the Forms, Instructions and Publications page on IRS.gov.
Request a copy of a tax return from the IRS
Prior year tax returns are available from the IRS for a fee. Taxpayers can request a copy of a tax return by completing and mailing Form 4506 to the IRS address listed on the form. There’s a $43 fee for each copy and these are available for the current tax year and up to seven years prior.
Tips to help taxpayers spot and avoid tax scams
Tax season is also busy season for savvy criminals. Scammers impersonating the IRS either over-the-phone, by email or in-person can steal money from people. All taxpayers should stay vigilant against these schemes.
Here are some tips to help people recognize and avoid tax-related scams.
Email phishing scams
The IRS does not initiate contact with taxpayers by email to request personal or financial information. Generally, the IRS first mails a paper bill to a person who owes taxes. In some special situations, the IRS will call or come to a home or business.
Taxpayers should report IRS, Treasury or tax-related suspicious online or email phishing scams to firstname.lastname@example.org. They should not open any attachments, click on any links, reply to the sender, or take any other actions that could put them at risk.
- Leave pre-recorded, urgent, or threatening messages on an answering system.
- Threaten to immediately bring in local police or other law enforcement groups to arrest the taxpayer for not paying, deport them or revoke their licenses.
- Call to demand immediate payment with a prepaid debit card, gift card or wire transfer.
- Ask for checks to third parties.
- Demand payment without giving the taxpayer an opportunity to question or appeal the amount owed.
Criminals can fake or spoof caller ID numbers to appear to be anywhere in the country. Scammers can even spoof an IRS office phone number or the numbers of various local, state, federal or tribal government agencies.
If a taxpayer receives an IRS or Treasury-related phone call, but doesn’t owe taxes and has no reason to think they do, they should:
- Not give out any information. Hang up immediately.
- Contact the Treasury Inspector General for Tax Administration to report the IRS impersonation scam call.
- Report the caller ID and callback number to the IRS by sending it to email@example.com. The subject line should include “IRS Phone Scam.”
- Report the call to the Federal Trade Commission.
If a taxpayer wants to verify what taxes they owe the IRS, they should: