This might be a first. The Internal Revenue Service essentially is going to be every taxpayers' valentine this year.
No, it's not because we love paying our taxes or the agency that collects them so much. It's because the IRS officially starts accepting and processing our 2020 tax returns on the Friday before St. Valentine's Weekend.
That means many of us will be consumed by the Internal Revenue Code as we work to complete our 1040 forms and get them to the IRS ASAP. For many, the target date is the Feb. 12 official opening of this tax season.
So that none of us experiences too much heartache — or, maybe more applicable to taxes, heartburn — here are three quick tax moves to consider in this shortest month of the year.
1. Collect your tax statements.
The 2020 calendar also means that today, Feb. 1, is the deadline for issuers of tax statements to send those documents to taxpayers. The most important ones for most filers are payment statements. These statements detail how much money you made last year from job(s), both salaried or as a contractor; investment earnings; unemployment benefits (yes, this government assistance is taxable income); and even from prize or gambling winnings.
But other on-their-way documents also have important information on items, such as mortgage interest or charitable donations, that can help you trim your tax bill.
You can get an idea of what statements you need by reviewing last year's filing. You also can check out my earlier post on the various tax statements you need to file your 2020 return.
I know eager filers are frustrated by having to wait for these documents, but take a breath, brew a cup of herbal tea and hold off filing until you get them. That's the only way you can be sure you enter the correct info on your Form 1040. And you do want your filling to be accurate. The IRS gets copies of most of your tax statements, too, and will let you know if it finds a discrepancy.
Valentine's Day adjacent filing aside, extra attention is not what any of us want from the IRS.
2. Decide how you'll file.
If you're still pondering your taxes, one of the things you need to think about now is how you plan to file.
More of us nowadays are going the do-it-yourself route with tax preparation software. That could work fine for you if you're taxes are not that complicated.
Rather than buy the software, check out ways you can get it for a reduced or no cost. Some financial institutions offer their customers discounts on popular software programs.
There's also Free File. This IRS partnership with the tax software industry already is open this filing season for taxpayers whose adjusted gross income is $72,000 or less. Nine companies are offering various ways that eligible taxpayers can prepare their returns online and e-file, as the name says, for free.
If, however, your taxes are more complicated or you're facing some new 2020 issues, you might want hire a tax professional. That's the case for many of us this filing season thanks to the new laws enacted in connection with COVID-19.
The biggie is the Recovery Rebate Credit (RRC), which is a way to get any money you didn't receive automatically when the IRS distributed coronavirus economic impact payments last summer or in late December/early January. The beauty of the RRC is that it's a refundable tax credit, meaning it will offset any tax you owe and if there's credit left over, it comes back to you as a refund.
Millions of folks got unemployment benefits for the first time after COVID-19 closures meant the end of their jobs, temporarily or permanently. As mentioned earlier, unemployment is taxable income, much to surprise of many of these folks now getting 1099-G forms with the tax details.
And small businesses are still trying to decipher the contortions created by the Paycheck Protection Program (PPP) and subsequent revisions to this law.
In many cases, the best way to decipher these new coronavirus tax implications, as well as sort through basic tax items, is to get reliable professional help. If that's your decision, you need to find a tax pro soon. Their calendars are going to be full this filing season. And if you wait until the April 15 filing deadline is close, even if you can find a tax preparer who will accept new clients, you'll likely pay more for his or her services.
3. Take advantage of new tax laws.
While the tax code changes created in response to the pandemic can be problematic, some could offer much needed tax relief. If you hire a tax preparer, she or he will help you take advantage of them. But if you're a DIY filer, or just someone like me who likes to know what's going on with my taxes, check out or talk with your tax pro about some new tax saving opportunities beyond the aforementioned Recovery Rebate Credit.
There's the Earned Income Tax Credit (EITC). This tax break isn't new. The EITC has for decades helped working taxpayers who don't make a lot of money. But it could be new to lots of people who in 2020 lost their jobs due to the coronavirus.
Look into whether you qualify for the EITC, which could be worth as much as $6,660 for qualifying families. Also look into whether you could get a bigger credit amount by using your 2019 income amount instead of your greatly reduced 2020 earnings.
The same option to use your 2019 instead of 2020 income level also applies to another long-standing tax break, the Additional Child Tax Credit. As with the EITC, the differences in the two years' earnings could make a difference in how much of this credit you get.
Also check your tax statements for any receipts from charities to which you donated last year. This filing season, you don't have to itemize to get a tax benefit for your philanthropy. You can claim up to $300 of your gifts directly on your Form 1040.
And for 2021 planning purposes, if you give again this year, this charitable donation tax break for nonitemizers has been enhanced for married donors. The $300 maximum donation deduction remains the same this tax year for single taxpayers, but married couples who file joint returns could claim as much as $600 on their 2021 returns.
More February tax moves: If any or all of these three tax considerations apply to your filing situation, they shouldn't take up too much time this February. That means you still can plan the perfect Valentine's Day with your true non-IRS love.
Once you've got all the hearts, flowers and candy taken care of, then you can get back to your taxes. You can find additional tax-wise ways to fill the 28 days of February over in the ol' blog's right column.
They are listed under the February Tax Moves heading (like the one at left), just beneath the countdown clock that's keeping track of how many days until April's Tax Day.
Even with this short month, there are enough tax tasks to take care of to your heart's content.