Fewer than two weeks remain before the May 17 deadline for federal and state income tax returns must be received by the Internal Revenue Service, the creator of the Glessner Group expects his clients still to be surprised with some of the requirements involved with the 2020 filings.
Some tax preparers call some of the pandemic-produced aspects as curveballs, but Gary Glessner refers to them as, “the nightmares.”
“This tax season has been pretty unique, but it hasn’t been as long as last year’s was; that’s for sure,” Glessner explained. “A couple of things stand out about this year’s season, though, and one is the fact the federal that government extended the due date for payments to May 17. But they did not extend the first quarter estimates for 2021. Those were still due April 15, and that was a very strange situation for a lot of our clients.
“What that means is that we had to try to figure out what someone should pay for a first-quarter estimate for 2021 before you even get their 2020 information,” he said. “It was somewhat difficult, and that’s why we thought they were going to extend everything, but that’s not what took place. It would have made sense, but it didn’t happen, and it made the whole situation a nightmare.”
Stimulus and Tax Season
Thanks to the Cares Act, the majority of Americans received a $1,200 stimulus payment last April or early May, and the second round of pandemic payments was $600 per person in late 2020. Then Congress approved in 2021, President Biden’s American Rescue Plan that sent another $1,400 per person.
What Glessner discovered is that most of his clients were unaware that if they didn’t receive these payments in 2020, when they file their 2020 tax return, they may be able to take credit for them to either 1) offset 2020 tax liability or 2) get the money refunded to them. These first TWO Economic Impact Payments were based on 2019 tax return data, which gets reconciled when you file 2020’s tax return.
These first two Economic Payments, EIP1 and EIP2, do absolutely factor into a taxpayer’s 2020 tax return if the individual meets certain income eligibility requirements.
“By now, most people have received the third stimulus payment, and now the federal government is talking about a fourth payment, so when you file your taxes next year, it’s going to be very similar to what it was last year and this year,” Glessner said. “I believe this time it will involve the child tax credit, and in getting an advance on that over the course of the year, there has been talk about increasing the overall amount of the child tax credit from $2,000 to $4,000 and maybe even to $8,000.
“There are also talks now about raising corporate, individual and capital gains tax rates under Biden’s new Tax Plan,” he added. “But the key one to watch will have a significant impact on wealth transfer from one generation to another.”
