What to know when you file your taxes this year

Today is Tax Day. For the second year in a row the IRS has extended the tax filing deadline due to the pandemic.

There’s been a delay in how fast people are getting their returns from the IRS. Tax experts say that’s because of the pandemic and changes in the law.

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Earlier this year, Congress passed a bill that changed the unemployment tax. If you collected unemployment in 2020, you only have to pay federal taxes on any unemployment income greater than $10,000. 

The IRS is also working on correcting stimulus payments. The payments are not taxable but those who did not receive their correct payments are able to submit a form in their return requesting the correct amount.  

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"The IRS was basing the first, second and third stimulus payments on prior year returns. Let’s say you didn’t qualify in 2019 because of your income but 2020 is lower than what it was in 2019 or you lost your job in 2020, so now all the sudden you would qualify for the stimulus payment. You’ll be able to claim them on the 2020 return," Henry Grzes, Lead Manager for Tax Practice & Ethics with the American Institute of CPAs, said.

Another big focus for the IRS this year is making sure people report cryptocurrency.

"It’s becoming much more popular. People are thinking, ‘it’s cryptocurrency I don’t have to report it because it’s virtual.’ It’s not cash but obviously it is a taxable transaction," Grzes said.

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Grzes says one of the first questions on the tax form this year is about cryptocurrency. The IRS has an FAQ sheet with over 40 facts about reporting cryptocurrency. The biggest thing you need to know is that the only instance where you don’t need to report your crypto is if all you did was buy it. But if you spent it, traded it or were even gifted it, you do have to report it.

"The IRS is basically looking to track the transactions associated with the virtual currency. So if you didn’t have a transaction that would generate an income or loss then the IRS doesn’t need to know about that in 2020," he said.

If you have not yet filed your taxes Grzes says to be sure to file for an extension. The penalty for not filing for either is 5% a month on what you owe, capped at 25%. But if you file and don’t have enough money to pay the IRS what you owe, the penalty for that is only .5% a month.