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5 tax tasks to take care after you've filed your return

Including some amended filing considerations that are affected this year by COVID-19 law changes.

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Photo by Ann H from Pexels

It's been a week since Tax Day 2021. Those of us who submitted our tax returns have just been enjoying being done with the Internal Revenue Service for another year.

But maybe we should give Uncle Sam's tax collector a little more thought before we finally wrap up this tax season.

Here are 5 tax matters you need to consider so that you can completely clear your 2020 tax year decks.

1. Check your refund status: This is the biggie every year for taxpayers who are expecting to get some money back in connection with their filings. The Internal Revenue Service is standing by its perennial advice here: Use the agency's Where's My Refund? feature.

In addition to being available on the IRS' web page, you also can find the online tracking tool on the IRS2Go app. Taxpayers without access to a computer can check their refund's status by calling toll-free (800) 829-1954.

Whichever refund tracking option you choose, you'll need to provide your Social Security number, tax filing status, and the exact amount of the refund shown on your 2020 return.

I know you want your money yesterday, but the IRS reminds us that the data on Where's My Refund? is updated just once a day, usually overnight, so checking repeatedly is not going get you any more information sooner.

2. Review your payroll withholding: A lot of taxpayers intentionally get tax refunds. They use overwithholding from their paychecks as a forced savings account. I get it. It's an easy way to make sure you don't spend every penny you earn. But it also means you must wait until tax filing season to access your money that's locked away in the Bank of Uncle Sam.

A better move might be to adjust your withholding and then put the amount that had been going to overpaid income taxes into a bank or credit union savings account. Most financial institutions will let you set up automatic deposits from your pay. That way you still don't see the money so you aren't tempted to spend it, but it's readily available in case of emergency, such as auto repair or your youngster's broken arm.

Adjusting your withholding is easy. Start by using the IRS' online Tax Withholding Estimator. It will help you make sure you're withholding the appropriate amount to avoid either owing or getting a huge refund at tax filing time.

Once you get the revised withholding amount, complete a new Form W-4 and give it to your payroll administrator. The results will show up in your next (more nearly next) paycheck.

3. Explore tax payment possibilities: Last week when you filed your 2020 Form 1040 or Form 4868 to get an extension, you paid all the tax you owed, right? If not, then you need to look at how to take care of any remaining balance. Now.

If you miscalculated and owe more than you paid, penalty and interest charges have been adding up for almost a week now. You can stop that by getting the rest to the U.S. Treasury now. The quickest of the many ways to pay taxes and stop those additional accruing charges is to pay electronically.

If, however, you don't have the cash on hand or your credit cards are maxed out, look into setting up a payment plan with the IRS.

4. File away your 2020 tax material: You did a great job of gathering all the documents you needed to file your tax return. Now it's time to store them.

My post with tax document record keeping suggestions is a good template to follow, even if I say so myself. The key record that everyone should keep forever is your actual Form 1040. Note, though, that this isn't just the 1040 itself, but all the supporting forms and schedules.

These official tax documents, either as paper or digital copies (or both if, like me, you're obsessive about documentation) are proof you met your annual tax-filing obligation. They also come in handy if you later find you need to file an amended return (more on this coming up in #5).

You also should keep supporting material that you used to fill out your return. That will help you show the IRS your work if it comes asking questions later.

How much later those inquiries are allowed helps determine how long you need to hand on to your tax (and other financial) records. The standing smartass tax answer is forever, since technically the IRS can come asking questions any time it suspects a taxpayer committed fraud.

But more realistically for most of us who do our best to get our tax returns right each year, the annual return statute of limitations is three years. Other time frames are detailed in the record keeping calendar section of my previously mentioned (and linked above) tax records post.

Cleaning out my old tax docs records June 2020

So that means really old and tangential tax documents can be tossed, like I finally did with years (and years and years) of tax material I threw out last year. Granted, much of it wasn't my personal tax material, but you get the idea.

5. Consider whether you need to amend your return: In going through all those documents you used to file your taxes, you discovered a mistake. It could be an error that means you owe more than you showed on your return. Or it could be an overlooked tax break, meaning you cheated yourself out of some tax savings.

In many cases, it's worth it to file an amended return. Just to be sure, the IRS suggests you use its interactive assistant Should I File an Amended Return? In some cases, says the IRS, you might not need to submit Form 1040-X, now possible electronically, to correct your return.

No X-form is needed where the issue is a math error or where you forgot to attach a form or schedule. Normally, the IRS will correct the wrong addition, subtraction or multiplication amount and notify you by mail. Similarly, the agency will send a letter requesting any missing forms or schedules.

And if you're expecting a refund from your original filing (see #1), the IRS says don't file an amended return before your 1040 has been processed.

That wait, though, could be longer than usual.

Other special 2020 amending issues: This filing season the IRS' initial examination of the tax returns it receives is complicated by, you guessed it, COVID-19.

The IRS is still dealing with the backlogs that built up during last year's health safety protocol office closures. Tax agency staff is still digging out, especially when it comes to snail mailed paper tax returns and all tax return related correspondence.

Then there are the coronavirus pandemic tax law changes.

The most notable one deals with taxable unemployment insurance (UI) benefits and took effect after filing season had begun.

Most folks who received unemployment income last year don't have to worry about redoing their 2020 taxes. The IRS is working on correcting the 1040s of taxpayers who filed and included their total UI benefits as income before Congress exempted up to $10,200 of UI from taxes.

Getting that automatically IRS corrected unemployment tax amount, however, could take a while.

First, while the IRS began recalculating the affected unemployment income returns this month, it's doing so in two phases. It's starting with single taxpayers eligible for the up to $10,200 tax break. After those are done, it will adjust the married filing jointly returns for couples who both got the benefits and are eligible for up to $20,400 in exempted benefits.

Backlog backup persists: The IRS also is still dealing with the backlogs that built up during last year's COVID-19 pandemic office closures. Tax agency staff is still digging out, especially when it comes to snail mailed paper tax returns and all tax return related correspondence.

The backlog means, says the IRS, that it's taking more than 21 days to issue refunds for some 2020 returns that require review. These include incorrect Recovery Rebate Credit amounts — that's the coronavirus economic impact payment amounts not automatically sent last year and claimed instead on this year's tax returns — or returns where taxpayers used their 2019 income to figure the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC).

In these cases, amending is not necessary, at least not now. All that's needed is continued patience.

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