Finance

How Economic Impact Payments Can Affect Your 2020 Taxes

4 February 2021By Tom Andrews

Written by

Tom Andrews

This tax advice is not intended, and cannot be used, to avoid any penalties as a result of taking any position from this column. Thomas Andrews is a CPA and a principal of AvMar Accounting Services. +1 954 764 0404; www.avmaraccounting.com

Now that it’s 2021, the Internal Revenue Service (IRS) has encouraged taxpayers to take the necessary actions so that 2020 tax returns can be filed in a timely manner and accurately. For crew, this would include keeping tabs on your mail and looking for the third-party tax documents that typically arrive in February or March. Some of these include but are not limited to W-2s, 1099s, and student loan forms. Note that if you typically use multiple addresses, you’ll want to make sure the IRS is updated with your latest address.

As I contemplate tax year 2020, one of my biggest concerns is the recovery rebate/economic impact payment. Taxpayers who received an economic impact payment should keep Notice 1444 with their 2020 tax records. They may be eligible to claim the economic stimulus credit on their tax year 2020 federal income tax return if:

  1. They did not receive an economic impact payment, or
  2. Their economic impact payment was less than $1,200 ($2,400 married filing jointly for 2019 or 2018), plus $500 for each qualifying child they had in 2020.

If a taxpayer didn’t receive the full amount of the economic impact payment for which they were eligible, they may be able to claim the recovery rebate credit when they file in 2021. Individuals do not need to complete information about the recovery rebate credit on their 2020 tax return unless they’re eligible to claim an additional credit amount. If you’re unsure as to whether you qualify for the credit, you will want to review the eligibility requirements at irs.gov.

Another tax change for 2020 concerns charitable deductions. Taxpayers who don’t itemize their deductions may take a charitable deduction of up to $300 cash contributions made in 2020 to qualifying organizations. For more information, read publication 526; this publication reviews the rules for charitable contributions. This can also be found at irs.gov.

The IRS is also making taxpayers aware that refunds are taking longer to process. Some returns may require additional review and processing. Some refunds, such as the earned income tax credit or additional child tax credit, cannot be issued before mid-February. The IRS reminds taxpayers that the fastest and safest way to receive a refund is to combine direct deposit with electronic filing. If you self-prepare your tax return and send it by mail instead of electronic filing, your tax return and refund may take extra time to process.

Finally, if you worked on multiple vessels during the year and do not receive a 1099 or W-2, it’s still your responsibility to keep track of your income and self-report that income even if your employer is not sending anything to the IRS. This is a common issue with foreign-flagged vessels that disregard U.S. payroll tax law.

This column originally ran in the February 2021 issue of Dockwalk.

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