Tax Updates March 2, 2021

Selecting Tax Return Preparers

The IRS is reminding taxpayers to choose a tax return preparer with care. While the vast majority of paid preparers provide quality service, others commit fraud, identity theft, and other scams. Credentials to look for in a professional with whom you’re trusting your personal and financial information include:

  • Year-round availability – being able to contact your preparer after tax season can be helpful if questions about your return arise.
  • Professional credentials – does your preparer belong to a professional organization, attend continuing education classes, and remain up-to-date on tax law?
  • Legitimate pricing – avoid preparers who base their fees on a percentage of a client’s refund.
    More information can be found in the new Tax Time Guide.

Tax Relief For Texas Storm Victims

The IRS has announced that taxpayers in FEMA-designated disaster areas will have until June 15, 2021 to file tax returns and make tax payments. This includes the entire state of Texas and areas of other states where FEMA disaster declarations have been made. Among other things, this also means that taxpayers will have until June 15 to make 2020 IRA contributions. Taxpayers do not need to contact the IRS to get this benefit; if their address of record is located in the disaster area, they will be provided the relief.

EIPs Issued; Recovery Rebate Credit Available

All legally permitted first and second round of Economic Impact Payments (EIPs) have been issued, the IRS has announced. Individuals who didn’t receive EIPs or didn’t receive the full amounts may be eligible to claim the Recovery Rebate Credit. To claim the credit, individuals will need to know the amounts of any EIPs they received. This information can be found online.

Health FSA Flexibility Increased

Due to the pandemic and the COVID-related Taxpayer Certainty and Disaster Tax Relief Act of 2020, the IRS has provided greater flexibility to employee benefit plans offering health flexible spending arrangements (FSAs) or dependent care assistance programs. These plans now have additional discretion to adjust their programs. Potential adjustments include carrying over unused amounts, extending the permissible period for incurring claims, allowing certain mid-year changes, and more. The decisions to adjust these programs is at the discretion of the employer that sponsors the plan.