For this year, 2020, there are some key items to consider involving credits, deductions, and refunds:
Recovery Rebate Credit/Economic Impact Payment.
Taxpayers who received an Economic Impact Payment should keep their Notice 1444, Your Economic Impact Payment, with their 2020 tax records. You may be eligible to claim the Recovery Rebate Credit on your tax year 2020 federal income tax return if:
- you didn’t receive an Economic Impact Payment, or
- your Economic Impact Payment was less than $1,200 ($2,400 if married filing jointly for 2019 or 2018), plus $500 for each qualifying child you had in 2020.
If you didn’t receive the full amount of the Economic Impact Payment for which you were eligible, you may be able to claim the Recovery Rebate Credit when you file in 2021. Individuals do not need to complete information about the Recovery Rebate Credit on the tax year 2020 Form 1040 or 1040-SR when filing in 2021 unless you are eligible to claim an additional credit amount.
Interest on refunds taxable. Taxpayers who received a federal tax refund in 2020 may have been paid interest. Remember refund interest payments are taxable and must be reported on federal income tax returns. In January 2021, the IRS will send you Form 1099-INT if you received interest totaling $10 or more.
Charitable deduction changes. New this year, if you don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations, see IRS Publication 526 to see what organizations are qualifying.
Refunds. The IRS always cautions taxpayers not to rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and processing may take longer. Similar to last year, 2019, refunds for tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credits did not receive refunds until after February 2020. Also, the entire refund was delayed not just the credit amounts on your tax return.
