The Internal Revenue Service plans to open tax-filing season on Feb. 12, although it is making its Free File program available starting Friday.

The tax season normally begins in late January, but the ongoing COVID-19 pandemic, the distribution of the latest round of Economic Impact Payments, a backlog of work from last year, and changes in the tax laws seem to be delaying tax season this year. Nevertheless, the IRS announced earlier this week that all tax forms and instructions are ready and that last-minute changes to the tax laws have been included in all the tax forms and instructions.

Despite the delays, the IRS said Friday that taxpayers can begin working early on their taxes with the Free File software. That will give taxpayers an opportunity to claim tax credits like the Recovery Rebate Credit and other deductions.

Changes this year

Most individual taxpayers will be able to file either the IRS Form 1040 or the new Form 1040-SR for seniors once they receive Forms W-2 and other earnings information from their employers and payers. The IRS has incorporated recent changes to the tax laws into the forms and instructions, and shared the updates with its partners who develop the software used by individuals and tax professionals to prepare and file their returns. Forms 1040 and 1040-SR and the associated instructions are available now on IRS.gov and are being printed for taxpayers who need a hard copy.

Economic Impact Payments are an advance payment of the Recovery Rebate Credit. Some important updates this year include the Recovery Rebate Credit worksheet on page 59 of the 1040/1040-SR instructions. Anyone who didn’t receive the full amount of both EIPs should include the amounts they received, before any offsets, when they file. Anyone who received the full amount for both EIPs should not include any information about the advance payments when they file their tax return.

Also new this year is the option to use prior year income amounts when computing the Earned Income Tax Credit and the Additional Child Tax Credit.

What to expect

To speed up tax refunds during the pandemic, the IRS is encouraging taxpayers to file electronically with direct deposit as soon as they have the information they need. People can start filing their tax returns immediately with tax software companies, including the IRS Free File partners. Those groups are starting to accept tax returns now, and the returns will be transmitted to the IRS starting Feb. 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 in a statement. “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, the average amount of the tax refund was over $2,500. More than 150 million tax returns are anticipated to be filed this year, with the majority before the Thursday, April 15 deadline.

Because of provisions in the PATH Act of 2015, the IRS can’t issue a refund involving the Earned Income Tax Credit or Additional Child Tax Credit before mid-February. The law gives the IRS extra time to stop fraudulent refunds and claims from being sent out, including to identity thieves.

The IRS is predicting a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there aren’t other issues with their tax returns. That would be roughly the same experience for taxpayers if the filing season opened in late January. Taxpayers will still need to check the IRS’s online Where’s My Refund tool for their personalized refund date.

Overall, the IRS expects nine out of 10 taxpayers will get their refunds 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.

Free File and more

A variety of tax software providers are once again making their online products available for free as part of a 19-year partnership with the IRS. There are nine products in English and two in Spanish.

“As we continue to confront the COVID-19 pandemic, IRS Free File and certain other similar online tax preparation products such as MilTax — Tax Services for the Military offered through the Department of Defense — offers taxpayers a free way to do their taxes from the safety of their own home and claim the tax credits and deductions they are due,” said Rettig in a statement. “We encourage eligible taxpayers … to follow the lead of over 4 million people who took advantage of these free services just last year. An IRS tax refund is often the single largest payment families receive during the year. We know how critical that refund is, especially this year.”

IRS Free File online products are available to any taxpayer or family who earned $72,000 or less in 2020. MilTax online software will be available on Jan. 19, 2021.

IRS Free File providers will accept completed tax returns and hold them until they can be filed electronically when the IRS starts processing returns. The Free File Fillable Forms, the electronic version of IRS paper forms, also will be available later when the filing season begins. This product is best for people comfortable preparing their own taxes and is safe and secure.

For 2021, these providers are participating in IRS Free File:

• 1040Now,
• ezTaxReturn.com,
• FreeTaxReturn.com,
• FileYourTaxes.com,
• Intuit (TurboTax),
• On-Line Taxes (OLT.com),
• TaxAct,
• TaxHawk (FreeTaxUSA),
• TaxSlayer.

For 2021, the following providers have IRS Free File products in Spanish:

• ezTaxReturn.com,
• TaxSlayer (Available after January 18).

Each IRS Free File provider sets its own eligibility rules for products based on age, income and state residency. For those who make $72,000 or less, they will find at least one product that matches their needs, and usually more. Some providers also provide free state preparation. Active duty military can use any IRS Free File product if their income was $72,000 or less.

Rep. Richard Neal, chairman of the tax-writing House Ways and Means Committee, expressed disappointment with the late start of tax season on Feb. 12.

“While I am disappointed that this year’s filing season will begin later than usual, I recognize that the IRS has faced extraordinary challenges throughout the COVID crisis,” Neal said in a statement Friday. “It’s a relief to know that despite contending with the distribution of two rounds of economic impact payments, facility closures, and other disruptions, the agency will be able to begin accepting returns within the next month. It is also encouraging that the IRS expects taxpayers who file electronically at the beginning of the season and claim refundable tax credits to receive their refunds by the first week of March. I urge taxpayers to complete their returns and file electronically as early as possible.”