Don't Mess With Taxes

The Internal Revenue Service is already accepting e-filed business returns and says Free File for eligible individuals to do their taxes and electronically file at no cost will open in mid-January.

If you use Free File, get ready. The Internal Revenue Service says it will open in mid-January.

UPDATE, Jan. 15, 2021: Soon is here! The IRS opened up its Free File site on Jan. 15. It also announced that it will officially open the full 2021 tax filing season on Feb. 12. That's when the IRS will start accepting and processing all 2020 tax returns, regardless of how they are filed.

Yes, the IRS announcement is a bit of vague posting. It did not give a precise date of when the 2021 version of the no-cost online tax return preparation and e-filing web page will be available for eligible filers.

A few filing facts: However, we do know a couple of things for sure.

First, you can use Free File this year if your adjusted gross income (AGI) is $72,000 or less. That threshold applies to all filing statuses.

Second, when Free File does open for business, the participating tax software companies will hold all the tax returns it gets until the official full start of the 2021 filing season. Then on that day, Free File providers will send the early-bird returns to the IRS for acceptance and processing.

Businesses get e-file head start: We also know that, again like last year, businesses already have been given the go-ahead to file their returns electronically.

The IRS started accepting business e-filed returns last Friday, Jan. 8.

Past filing seasons as prologue: A quick look back can give us a speculative preview of what's ahead this 2021 tax filing season.

In 2020, the IRS started accepting business returns on Jan. 7 of that year. We're on roughly the same schedule this year, with business tax e-filing opening day 2021 kicking off last Friday, Jan. 8, per the agency's Modernized e-File (MeF) Status page. IRS' MeF operational status page confirms that, noting it is "processing business tax returns only."

That gives us hope that this year is on roughly the same schedule.

Looking at last year's individual tax return filing timetable, Free File started accepting returns on Jan. 13, 2020. The official full start of last year's tax filing season kicked off two weeks later, on Jan. 27, 2020.

Given that IRS Commissioner Chuck Rettig told Congress last fall that the 2021 filing season would start on time, I'm hoping that the current filing season's full official opening will be the week of Jan. 25. Yes, I'm hedging a bit, giving the full week as a possibility.

And since in the past Free File has started at least a week before the official start of filing season, I'm guessing — and I emphasize that it's pure speculation on my part — that the free program will open at least by Monday, Jan. 18, even though that's the Rev. Dr. Martin Luther King, Jr. federal holiday.

It even could happen — again, just guessing — as soon as this Friday, Jan. 15, which already is an important tax deadline date.

Don't file too soon: While I know millions of folks file their taxes early each year because they are expecting refunds, don't get ahead of yourself.

You can't file your taxes until you have all the statements with information that you'll need to fill out the Form 1040 and its related schedules. For those with relatively simple tax lives, that's generally just your W-2.

But companies don't have to get this earnings statement to you until Feb. 1 this year, since the usual Jan. 31 deadline is a Sunday. And while some do issue them early, you need to wait.

You'll want the final official W-2 figures to make sure your 1040 is (1) accepted by the IRS and, more importantly, (2) is correct.

You definitely don't want to file early then have the IRS find an error that forces you to submit an amended return. That will slow down the process and undercut your main reasons for filing quickly, which is getting your refund.

Added 2021 filing issues: Other taxpayers this year will be awaiting 1099 forms from gig and other contracting jobs they performed in 2020 after they had their regular salaries reduced, or their jobs completely eliminated, by the COVID-19 pandemic.

While you don't have to submit your 1099s when you file, the IRS will get copies if any job paid you at least $600. So again, you want to make sure you have the correct and complete info on your 1040.

And if you received any unemployment compensation due to a coronavirus layoff, you'll have to report that income, too. You'll be getting a Form 1099-G with this information.

IRS, tax software companies to be ready: Your tax preparer will help you with these filing complications, as well as how you might be able to get more COVID-19 economic relief money if you didn't get the full payments last year.

The IRS says it has completed updates to key federal tax forms and instructions, including the latest need to figure the COVID-19 payments, officially known as the Recovery Rebate Credit that will be claimed directly on Form 1040.

The tax software companies get that data, too, and will be updating their programs. That process is probably why we don't have a firm Free File opening date yet. If you do your taxes yourself using one of these products, be sure to say yes when it wants to update its material.

Whatever your 2021 filing method and time frame, again be patient when it comes to filing your return this year.

I know it's been tough financially for so many. But the last thing you want is for an avoidable tax filing mistake made in haste to make things worse.

You also might find these items of interest:

• Picking a tax pro
• Decoding your W-2
• The many versions of IRS Form 1099

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