The big news on the tax front from last week was that the individual tax deadlines for federal and some state income taxes were extended to May 17, 2021. New York State is one of the states which chose to extend the deadline in keeping with the IRS decision to do so—be sure to check with your own state and local tax authorities to see if this applies where you do business as well.
A few other tax reminders related to the extended deadline:
The IRS is advising taxpayers not to file amended returns for unemployment income, changing payment dates or the Premium Tax Credit. If you haven’t filed your return already, then you have a little extra time, but it’s best to get it squared away as soon as possible—especially if you are expecting a refund. However, if you have already filed your taxes, you may be wondering if given the new Covid-19 relief plan tax changes if you need to file an amended return. Two examples of recent significant tax implications on your return include:
The short answer about whether to file an amended return in the cases above is, “No.” The IRS is advising taxpayers that they can handle adjusting your return without you filing an amended return. Even if you did not claim the unemployment income as non-taxable or the Premium Tax Credit, the IRS is advising you not to file an amended return to correct these amounts. This could change, so watch for additional guidance as it becomes available.
A few facts about the Premium Tax Credit—does it apply to your freelance taxes? As a reminder, the premium tax credit repayment may apply if you or someone in your family received advance payments of the premium tax credit through the Health Insurance Marketplace. To claim it, you must complete Form 8962, Premium Tax Credit. This would be based on the information in Form 1095-A, your Health Insurance Marketplace Statement, which provides you with information about your health care coverage. If you haven’t filed already, beware that filing your return without reconciling your advance payments will delay your refund. You must file an income tax return for this purpose even if you are not otherwise required to do so.
If you choose not to get advance credit payments, you can claim the full amount of the premium tax credit that you are allowed when you file your tax return. This will increase your refund or lower the amount of tax you owe.
When should freelancers file an amended return? Excluding the cases above, there are times when filing an amended return is necessary—especially if you have made a mistake. In general if you made a math error on your return the IRS may correct it when processing your original return. If you didn’t include a required form or schedule, the IRS will also send you a notice via U.S. mail about the missing item.
You can file an amended return if you need to fix an error or if you forgot to claim a tax credit or deduction. You should use Form 1040X to amend a federal income tax return that you filed before. Make sure you check the box at the top of the form that shows which year you are amending.
If you file an amended return for more than one year, use a separate 1040X for each tax year. Mail them in separate envelopes to the IRS. This year the IRS may let some taxpayers e-file an amended return, unless this applies to you, you’ll need to file a paper version of Form 1040X and mail it to the IRS.
To claim a refund file Form 1040X no more than three years from the date you filed your original tax return. You can also file it no more than two years from the date you paid the tax, if that date is later than the three-year rule.
Here are some specific cases when the IRS indicates you may need to amend your federal tax return:
If you can file your taxes and pay by May 17, it’s best to start now and complete your individual taxes. While this extension is automatic, filing sooner rather than later, especially if you are anticipating a refund is the best way to expedite having that cash back in your bank account—even before the extended May 17 deadline arrives.
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