WASHINGTON ― The Internal Revenue Service announced that the nation’s tax season will start on Friday, February 12, 2021, when the tax agency will begin accepting and processing 2020 tax year returns.
The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.
This programming work is critical to ensuring IRS systems run smoothly. If filing season were opened without the correct programming in place, then there could be a delay in issuing refunds to taxpayers. These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.
To speed refunds during the pandemic, the IRS urges taxpayers to file electronically with direct deposit as soon as they have the information they need. People can begin filing their tax returns immediately with tax software companies, including IRS Free File partners. These groups are starting to accept tax returns now, and the returns will be transmitted to the IRS starting February 12.
“Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time,” said IRS Commissioner Chuck Rettig. “Given the pandemic, this is one of the nation’s most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible.”
Last year’s average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed this year, with the vast majority before the Thursday, April 15 deadline.
Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.
The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check Where’s My Refund for their personalized refund date.
Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return. The IRS urges taxpayers and tax professionals to file electronically. To avoid delays in processing, people should avoid filing paper returns wherever possible.
Tips for taxpayers to make filing easier
To speed refunds and help with their tax filing, the IRS urges people to follow these simple steps:
File electronically and use direct deposit for the quickest refunds.
Check IRS.gov for the latest tax information, including the latest on Economic Impact Payments. There is no need to call.
For those who may be eligible for stimulus payments, they should carefully review the guidelines for the Recovery Rebate Credit. Most people received Economic Impact Payments automatically, and anyone who received the maximum amount does not need to include any information about their payments when they file. However, those who didn’t receive a payment or only received a partial payment may be eligible to claim the Recovery Rebate Credit when they file their 2020 tax return. Tax preparation software, including IRS Free File, will help taxpayers figure the amount.
Remember, advance stimulus payments received separately are not taxable, and they do not reduce the taxpayer’s refund when they file in 2021.
Key filing season dates
There are several important dates taxpayers should keep in mind for this year’s filing season:
January 15. IRS Free File opens. Taxpayers can begin filing returns through Free File partners; tax returns will be transmitted to the IRS starting Feb. 12. Tax software companies also are accepting tax filings in advance.
January 29. Earned Income Tax Credit Awareness Day to raise awareness of valuable tax credits available to many people – including the option to use prior-year income to qualify.
February 12. IRS begins 2021 tax season. Individual tax returns begin being accepted and processing begins.
February 22. Projected date for the IRS.gov Where’s My Refund tool being updated for those claiming EITC and ACTC, also referred to as PATH Act returns.
First week of March. Tax refunds begin reaching those claiming EITC and ACTC (PATH Act returns) for those who file electronically with direct deposit and there are no issues with their tax returns.
April 15. Deadline for filing 2020 tax returns.
October 15. Deadline to file for those requesting an extension on their 2020 tax returns
Filing season opening
The filing season open follows IRS work to update its programming and test its systems to factor in the second Economic Impact Payments and other tax law changes. These changes are complex and take time to help ensure proper processing of tax returns and refunds as well as coordination with tax software industry, resulting in the February 12 start date.
The IRS must ensure systems are prepared to properly process and check tax returns to verify the proper amount of EIP’s are credited on taxpayer accounts – and provide remaining funds to eligible taxpayers.
Although tax seasons frequently begin in late January, there have been five instances since 2007 when filing seasons did not start for some taxpayers until February due to tax law changes made just before the start of tax time.
The IRS has made a major change to 2020 tax reporting that will impact business owners and tax professionals. Form 1099-NEC has recently been released, replacing Form 1099-MISC box 7 data for reporting non-employee compensation beginning with the reporting of 2020 tax info.
The Purpose of Form 1099-NEC
The new 1099-NEC (NEC stands for Non-Employee Compensation) is based on an old form that has been retired since 1982. The requirements to file non-employee compensation on the reinstated 1099-NEC are the same as had been in place for the 1099-MISC with box 7 data.
Specifically, the new 1099-NEC will capture payments of $600 or more to service providers — typically work done by an independent contractor who is a sole proprietor or member of a partnership. Examples include graphic designers, web developers, cleaning professionals, freelance writers, landscapers, home health care assistants and other self-employed individuals.
It’s important to note that you must also file Form 1099-NEC (report in box 4) for anyone you withheld federal income tax under the backup withholding rules, regardless of the amount.
Both Forms
1099-NEC
1099-MISC
Payer Information
Box 1
Nonemployee compensation
Rents
Recipient Information
Box 2
Reserved (blank)
Royalties
Box 3
Reserved (blank)
Other income
Box 4
Federal income tax withheld
Federal income tax withheld
Box 5
State tax withheld
Fishing boat proceeds
Box 6
State/Payer’s state no.
Medical and health care payments
Box 7
State income
Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale
Box 8
N/A
Substitute payments in lieu of dividends or interest
Box 9
N/A
Crop insurance proceeds
Box 10
N/A
Gross proceeds paid to an attorney
Box 11
N/A
Reserved (blank)
Box 12
N/A
Section 409A deferrals
Box 13
N/A
Excess golden parachute payments
Box 14
N/A
Nonqualified deferred compensation
Box 15
N/A
State tax withheld
Box 16
N/A
State/Payer’s state no.
Box 17
N/A
State income
Form 1099-NEC replaces Form 1099-MISC with box 7 data as the new form for reporting nonemployee compensation. This change is for the 2020 tax year, which are filed in 2021.
Why the Change Occurred
Back in 2015, the PATH (Protecting Americans from Tax Hikes) Act changed the due date for 1099-MISC forms with data in box 7 from March 31 to January 31. However, the filing date for non-box 7 forms remained March 31. As a result of the two different deadlines for the same form, late 1099-MISC forms for non-employee compensation sometimes led to the counting of non-box 7 forms as late.
Let’s look at a scenario:
You submit your forms with data in box 7 to the IRS by the January 31 deadline.
Some late box-7 forms arrive after January 31.
You then send non-box 7 forms to the IRS, meeting the deadline of March 31.
In the same batch, you send the late box-7 forms.
Because the late box-7 forms are combined with the non-box 7 forms, the IRS sometimes mistakenly considered all the forms late. The new 1099-NEC form was reinstated to prevent this from occurring.
Filing and Submitting Guidelines
Beginning with the 2020 forms, copies of your 1099-NEC forms must generally be distributed and/or postmarked to independent contractors and other recipients by January 31. In 2021, however, the date is February 1 since January 31 falls on a Sunday. The deadline for submitting to the IRS is the same as the recipient deadline — regardless if filing via paper or electronically.
As part of the Taxpayer First Act, many businesses will not be allowed to submit paper forms. For tax year 2020, you must electronically file if you have 100 forms or more. The threshold applies separately for each type of return and separately to each type of corrected return.
When to Use Form 1099-MISC
You should use the 1099-MISC for non-box 7 reporting. The type of payments typically required to be reported on this form include royalties, rent, prizes and awards. You must also file Form 1099-MISC for anyone from whom you withheld federal income tax under the backup withholding rules, regardless of the amount. In some cases, you will need to file both a 1099-NEC and a 1099-MISC for the same individual.
The deadlines for 2020 Form 1099-MISC are:
January 31: Distribute to recipients (for 2021, the date is February 1)
February 16: Distribute to recipients with data in Boxes 8 or 10
February 28: Submit forms to the IRS if filing by paper (for 2021, the date is March 1)
March 31: Submit forms to the IRS if filing electronically
Once again, for tax year 2020, the electronic filing threshold is 100 forms.
2020 Information Returns
Form
Recipient Due Date
IRS Due Date
(Paper Filing)
IRS Due Date
(Electronic Filing)
1099-NEC
2/1/21
2/1/21
2/1/21
1099-MISC
(No Data in Box 8 or 10)
2/1/21
3/1/21
3/31/21
1099-MISC
(With Data in Box 8 or 10)
2/16/21
3/1/21
3/31/21
File 1099-NEC and 1099-MISC Forms
The fastest, most efficient way to meet your reporting obligations is to contact our office for help with your filings.
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IRS and Treasury continue to work closely with our partners in the tax and financial industry to do everything possible to get the second round of Economic Impact Payments to the American people as quickly as possible.
At this point, over 100 million EIPs have been direct deposited into eligible recipients’ accounts. Some recipients may have had their payment directed to the temporary bank account established when their 2019 tax return was filed. The IRS and tax industry partners are taking immediate steps to redirect stimulus payments to the correct account for those affected. The IRS anticipates many additional taxpayers will receive payments following this effort.
For those taxpayers who checked Get My Payment and received a response indicating a direct deposit was to be sent to an account they do not recognize, the IRS advises them to continue to monitor their bank accounts for deposits.
The IRS emphasizes that the information taxpayers see in the Get My Payment tool, including account numbers and potential deposit dates, may not display an accurate account number as we continue to work through updates. No action is necessary for taxpayers as this work continues; they do not need to call the IRS, their tax provider or their financial institution.
Additional information:
Direct deposits. For those who have not yet received direct deposits, they should continue to watch their bank accounts for a deposit in coming days. IRS tax industry partners are taking steps to redirect stimulus payments to the correct taxpayer account for as many people as possible. The IRS emphasizes that the information taxpayers see in the Get My Payment tool, including account numbers and potential deposit dates, may continue to display unfamiliar account numbers as the IRS continues to work through and update this issue. No action is necessary for taxpayers as this work continues; they do not need to call the IRS, their tax provider or their financial institution.
Mail. Some people will receive their second Economic Impact Payment by mail, either as a paper check or in the form of a debit card. For people in this group, the IRS urges people to carefully watch their mail for either of these during January. Additional information is available on IRS.gov.
Tax returns. While the IRS continues to closely work with our industry partners to quickly deliver more Economic Impact Payments, the IRS reminds eligible taxpayers who don’t receive a payment – or the full amount– that they can claim the Recovery Rebate Credit when they file their 2020 tax return. Taxpayers in this situation are urged to file electronically with direct deposit to ensure their tax refund – and their stimulus payment – reach them as soon as possible.
The IRS appreciates the patience of taxpayers as we work with our industry partners to complete delivery of payments as quickly as possible.
Additional information on Get My Payment
The IRS reassures taxpayers who do not recognize the bank account number displayed in the Get My Payment tool that deposits were not made to the wrong account; this is not an indicator of fraud. If you do not recognize the account number, it may be an issue related to how information is displayed in the tool tied to temporary accounts used for refund loans/banking products. The IRS is working to address this. People do not need to complete Form 14039, Identity Theft Affidavit, or contact the IRS.
WASHINGTON – Starting this week, the Treasury Department and the Internal Revenue Service are sending approximately 8 million second Economic Impact Payments (EIPs) by prepaid debit card.
These EIP Cards follow the millions of payments already made by direct deposit and the ongoing mailing of paper checks that are delivering the second round of Economic Impact Payments as rapidly as possible.
For those who don’t receive a direct deposit, they should watch their mail for either a paper check or a prepaid debit card. To speed delivery of the payments to reach as many people as soon as possible the Treasury’s Bureau of Fiscal Service is sending payments out by prepaid debit card.
IRS and Treasury urge eligible people who don’t receive a direct deposit to watch their mail carefully during this period. The prepaid debit card, called the Economic Impact Payment card, is sponsored by the Bureau of the Fiscal Service and is issued by Treasury’s financial agent, MetaBank®, N.A. The IRS does not determine who receives a prepaid debit card.
Taxpayers should note that the form of payment for the second mailed EIP may be different than the first mailed EIP. Some people who received a paper check last time might receive a prepaid debit card this time, and some people who received a prepaid debit card last time may receive a paper check.
More information about these cards is available at EIPcard.com.
EIP Cards are safe, convenient and secure. EIP Card recipients can make purchases online or in stores anywhere Visa® Debit Cards are accepted. They can get cash from domestic in-network ATMs, transfer funds to a personal bank account and obtain a replacement EIP Card if needed without incurring any fees. They can also check their card balance online, through a mobile app or by phone without incurring fees. The EIP Card provides consumer protections including certain protections against fraud, loss and other errors.
EIP Cards are being sent in a white envelope that prominently displays the U.S. Department of the Treasury seal. The EIP Card has the Visa name on the front of the Card and the issuing bank name, MetaBank®, N.A. on the back of the card. Each mailing will include instructions on how to securely activate and use the EIP Card.
EIP Cards are being issued to eligible recipients across all 50 states and the District of Columbia. Residents of the western part of the United States are generally more likely to receive an EIP Card.
The swift issuance of this second round of payments follows the successful delivery of more than $270 billion in CARES Act Economic Impact Payments earlier this year. To check the status of a payment, visit IRS.gov/GetMyPayment. For more information about Economic Impact Payments visit IRS.gov/EIP.
