The IRS delayed the start of this year’s tax season so that it could focus on the distribution of second round Economic Impact Payments (EIP) and implementation of tax regulations originating from the 2020 CARES Act and other relief packages. The later start has also allowed the IRS to do additional programming and testing to ensure its systems are running smoothly.
To assist individual taxpayers in navigating tax changes that occurred in 2020, the IRS has updated its Publication 17 guide to preparing individual tax returns. This publication is a supplement to the information contained in the standard tax form instruction booklet, and provides important information on the Earned Income Tax Credit, IRS Free File, the taxability of unemployment compensation, and Recovery Rebate Credit – a one-time benefit for individuals who did not receive the maximum amount of the EIP.
Despite its confidence in a smoother tax season this year, the IRS continues to face COVID-19 related service delays in live phone support, answering mail from taxpayers, reviewing tax returns, and processing tax returns filed on paper. Even with the delay, the back-log of paper returns is large and will likely increase. As a result, the IRS is asking taxpayers who can file their returns electronically to do so. Early e-filers can expect their 2020 tax year refund to be deposited into their bank account by the first week in March if they opt for direct deposit and there are no issues with their return.