Pub. 3 2021 Issue 1

J A N U A R Y / F E B R U A R Y 2 0 2 1 12 nebraska cpas TAX SEASON NEWS FOR INDIVIDUALS & THEIR 2020 TAX RETURN BY SHARON KREIDER, CPA C P A I N S I D E R 1. Economic impact payments. Round one and round two of economic impact payments (EIP) are reconciled on the 2020 tax return. The EIPs were an advance. If the client received less than he or she should have, that individual will be able to claim an additional EIP credit on his or her 2020 return. Clients who received too much of an advanced rebate because the payment was based on their 2019 (or 2018 for the first-round payments if the 2019 return was not yet filed) income do not need to repay the excess when they file their 2020 tax return. Two EIP problems exist at the moment. The first problem is that clients want to know when they will receive their $600 second-round payment. Direct deposit payments have already been made. If the client changed his or her bank account since filing the 2019 return, direct deposits were returned by the “old” bank to the IRS, and the credit is only available on the 2020 return. If direct deposit information was not included on the 2019 returns, EIP checks or debit cards are in the mail. The client can check on the status of his or her first- and second-round EIPs at https://sa.www4.irs.gov/ irfof-wmsp/login. The status includes the payment date and the method (direct deposit or mailed payment date). The second problemclients are asking about is the next promised round of stimulus payments. From the news, if additional relief legislation is passed, an additional $1,400 per adult and some amount for children under 17 will result. You already know the questions that will arrive by phonemessage, email, and text from your clients. Here is a question just for us in the tax practitioner community. Will an additional amount be reconciled on the 2020 return since it appears that the proposed rebate will again be based on the 2019 adjusted gross income (AGI)?Will the third round of EIPs delay finishing and filing our returns? Tax practitioner note. NewEIP FAQs have been posted. For the latest news on the second-round payments, check out https://www.irs.gov/coronavirus/get-my-payment. 2. Sick leave and family credits on the Form 1040. Self-employed individuals may be entitled to sick leave and/or family leave credit on their 2020 Form 1040. With 25 million COVID-19 cases in the United States, it’s likely that when you ask your client how their year has been they will respond about (1) their own COVID-19 illness, (2) their exposure and quarantine, and/or (3) their awful homeschooling experience with the kids. If the self-employed person was instead an