There are a lot of new wrinkles being added to the 2021 tax season, thanks in large part to the COVID-19 pandemic that decimated the American economy over most of the last year. Many people lost jobs and are still having a difficult time finding work as the economy slowly rebuilds from the pandemic.
The silver lining is that if a person lost a job in 2020 and dealt with extended periods out of work, they may qualify for a new tax credit. This is good news for people who will not qualify for the earned income tax credit due to losing their jobs.
As you’re getting ready to begin tax preparation in Hayward, CA, here’s an overview of what you should know.
Elements of COVID-19 relief for those suffering financially
The COVID-19 relief package signed into law by President Trump at the end of December included a special tax break for obtaining that earned income credit.
The responsibility still falls on tax filers and tax prep specialists to take full advantage of that option. It’s important not to assume one will or will not qualify for the earned income tax credit—there must be some calculation that occurs to make sure you qualify.
The payout of this tax break also is not immediate. Anyone who claims the credit will likely experience some mandatory delays in getting their payouts, even if they file right away at the beginning of tax season. That EITC refund will most likely start going out in early March for people who file their tax return online and choose direct deposit, assuming there is no issue with their tax return.
Tax filers will have the opportunity to choose whether they wish to use their 2019 or 2020 earned income to calculate that earned income tax credit on their returns, a one-time lookback provision that was added as part of the relief package. This also helps people dealing with financial turmoil qualify for refundable portions of the child tax credit. The idea is that people will pick the year that generates the larger tax break.
This lookback provision is expected to be particularly beneficial for taxpayers who lost their jobs and/or were unemployed throughout much of 2020, expected to make up to $25,000 in the last year and have children in their home.
This relief will be crucial for many demographics. In particular, people of color and single women raising families risked losing as much as 80 percent of tax refunds due to unemployment reducing their available tax credits, including the refundable child tax credit and the earned income tax credit.
It’s important to discuss your available tax options with a tax preparation specialist to ensure you’re getting the most money back possible in your tax return. To learn more about tax preparation in Hayward, CA and what types of credits and other tax breaks you might qualify for this year, we encourage you to contact the team at Menjivar & Company CPAs, Inc. today and we will be happy to assist you.
Categorised in: Tax Preparation