New Tax Changes That Could Affect Your 2020 Return

Summary

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Podcast Summary

WSJ Your Money Briefing

Episode: "New Tax Changes That Could Affect Your 2020 Return"

Date: March 31, 2021
Host: J.R. Whalen
Guest: Laura Saunders, Wall Street Journal Tax Reporter

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Episode Overview

This episode addresses the rapidly unfolding tax changes affecting 2020 tax returns, much of which stemmed from the retroactive provisions in the March 2021 stimulus bill. Tax reporter Laura Saunders explains how these last-minute updates impact filing deadlines, deductions (particularly for pandemic-related expenses), amended returns, and the special unemployment benefits exclusion.

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Key Discussion Points & Insights

1. Last-Minute Tax Changes and Their Unusual Timing

• Congress passed a major stimulus bill in March 2021, introducing retroactive tax changes for the 2020 tax year.
• Both the IRS and taxpayers are scrambling to implement and respond to these changes, creating confusion and additional work.
  • Quote:

    "No, it’s not typical at all. And remember that it’s not the IRS so much as it’s Congress. Congress passed a big stimulus bill in March and it had retroactive changes for 2020, and the IRS has to cope with them. And so do taxpayers and their advisors, by the way."
    — Laura Saunders (02:05)

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2. New Tax Filing Deadline

• The tax filing deadline for individuals was extended from April 15 to May 17, 2021.
  • Applies only to individuals, not to corporations, many businesses, or nonprofits.
• Filing for an extension remains possible: the usual six-month extension now runs from May 17 to October 15, not from April 15.
  • Quote:

    “It’s just for, basically for individual tax filings, not nonprofits.”
    — Laura Saunders (02:29)

  • Quote:

    "You can still get an extension... this year it goes from May 17th till October 15th. So you can still get the extension, but it doesn’t go an extra month."
    — Laura Saunders (02:51)

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3. Retirement Contributions and Deadline Changes

• IRA, Roth IRA, HSA, and similar account contribution deadlines are also extended to May 17, 2021.
• This extension gives filers extra time to make 2020 contributions.
  • Quote:

    "For Roth IRAs, traditional IRAs, HSAs, and a few other things, the deadline has moved from April 15 to, to May 17."
    — Laura Saunders (03:12)

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4. COVID-19 Protective Equipment as Medical Deductions

• The IRS clarified that out-of-pocket purchases of PPE (e.g., masks, hand sanitizer) are deductible as medical expenses for 2020.
• The medical expense deduction only applies if total unreimbursed expenses exceed 7.5% of adjusted gross income, a threshold many people do not meet.
  • Quote:

    "It’s a little bit complicated because in order to get a medical expenses deduction, you have to have expenses that are greater than 7.5% of your adjusted gross income. And that is a really high hurdle for a lot of."
    — Laura Saunders (03:59)

  • Quote:

    "Once you’re over that threshold, there’s a whole range of expenses that are not reimbursed by insurance that are deductible for tax purposes. And now we know that PPE and Covid supplies and things like that are on the list."
    — Laura Saunders (04:13)

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5. Correcting Previously Filed Returns

• If someone discovers a change affecting a return already filed, options are limited:
  • Amend the return if necessary.
  • Distinction between correcting before and after the (new) due date (May 17). Each scenario follows different rules and procedures.
  • Complex cases likely require consulting a tax professional.
  • Quote:

    "You don’t have a lot of great options. You can amend your tax return... If you’re going to do this, you probably need to be talking to a tax professional, a complicated area."
    — Laura Saunders (04:47)

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6. Unemployment Benefits Exclusion

• The new law exempts the first $10,200 per person of unemployment compensation from federal taxes for 2020.
  • Normally, unemployment benefits are fully taxable.
• For those who already filed:
  • Await further IRS guidance on how adjustments will be handled—potentially automatic refunds.
• For those who haven't filed:
  • IRS has released a worksheet; tax software is being updated to handle the new exclusion.
  • The Wall Street Journal pressed the IRS to ensure the exclusion aligned with Congressional intent, benefitting more people.
  • Quote:

    "Congress exempted the first $10,200 per recipient of unemployment payments. Usually these are totally taxable, but they're not taxable for 2020... They hope they're going to make an automatic adjustment and send people a check if they deserve it."
    — Laura Saunders (05:24)

  • Quote:

    "We asked about it and they told us they changed it so more people qualify for this deduction."
    — Laura Saunders (06:25)

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Memorable Moments & Notable Quotes

• On the challenge for the IRS and taxpayers:
  "It’s a lot of work for a lot of people."
  — J.R. Whalen (02:21)

• On the complexity of medical expense deductions:
  "That is a really high hurdle for a lot of [people].”
  — Laura Saunders (03:59)

• On the importance of staying updated:
  "If you’re going to do this, you probably need to be talking to a tax professional, a complicated area."
  — Laura Saunders (04:58)

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Timestamps for Key Segments

| Segment | Timestamp | |-------------------------------------------|------------| | Unusual timing of tax changes | 02:05 | | New tax deadline details | 02:29 | | Extension period clarification | 02:51 | | Retirement account deadline changes | 03:12 | | PPE and medical expense deductions | 03:59 | | Amending filed returns | 04:47 | | Unemployment benefits exclusion | 05:24 | | IRS policy clarification due to WSJ | 06:25 |

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Summary Flow & Recommendations

In this episode, Laura Saunders provides clear explanations on a raft of late-breaking changes to 2020 federal tax policy. The conversation is pragmatic, direct, and focused on practical consequences, particularly for individual filers. Both experts emphasize the importance of double-checking the latest IRS guidance—especially for taxpayers affected by unemployment exclusions or those with substantial medical expenses.

Key Takeaways:

• The tax world is unusually fluid for 2020 returns—pay close attention to new IRS bulletins.
• Take advantage of the extended filing (May 17) and contribution deadlines, but don’t assume all deadlines are extended the same way.
• If you already filed and upcoming changes apply, stay tuned for more IRS announcements before rushing to amend returns.
• Understand that new deductions (PPE, unemployment benefits exclusion) have specific and sometimes high eligibility bars.

Taxpayers are encouraged to seek professional advice if their situations are complex or if recent changes impact returns they've already submitted.

Transcript

[A]

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[B]

Here's your money briefing for Wednesday, March 31st. I'm J.R. whalen for the Wall Street Journal. Figuring out your taxes is hard enough keeping up with the numerous changes the IRS has put into place, some in just the past few days. Well, that can be enough to make your head spin.

[C]

Congress passed a big stimulus bill in March and it had retroactive changes for 2020. And the IRS has to cope with them and so do taxpayers and their advisors, by the way.

[B]

Coming up, our tax reporter, Laura Saunders will go through the latest changes and how they could affect your 2020 tax return. That's after the break.

[A]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. [e-mail] Washingtonwise.

[B]

Anybody going through paperwork and preparing their tax returns knows that 2020 was a crazy year. Well, it's getting just a little crazier. The IRS has announced some changes to rules and deductions that can complicate the math on your return. Fortunately, our tax reporter, Laura Saunders is with us to help clear up some of the confusion. Laura, thanks for taking the time to talk.

[C]

Thanks so much for having me.

[B]

So the IRS has announced several late changes regarding 2020 taxes, the taxes people are working on right now. We'll run through them in a moment. But Laura, these changes are coming so late in the tax season. Is this typical?

[C]

No, it's not typical at all. And remember that it's not the IRS so much as it's Congress. Congress passed a big stimulus bill in March and it had retroactive changes for 2020, and the IRS has to cope with them. And so do taxpayers and their advisors, by the way.

[B]

Yeah, it's a lot of work for a lot of people. So the new tax filing deadline for this year is May 17th. Who does that apply to?

[C]

Well, it has very narrow range, actually it applies to individuals, it does not apply to corporations and, you know, many businesses, unless it's a gig business or something like that. But it's just for, basically for individual tax filings, not nonprofits.

[B]

Okay, but even with the new date in May, if someone has to file an extension, what would they do?

[C]

Well, you can still get an extension. It's usually a six month extension from April 15th to October 15th. This year it goes from May 17th till October 15th. So you can still get the extension, but it doesn't go an extra month.

[B]

Now, does the new tax filing deadline impact contributions to retirement accounts like traditional IRAs?

[C]

Well. Well, it's a good question. I'm glad you asked me. We didn't know the answer to that until Monday. Now, I think a lot of people assumed that the IRS delayed the deadline for filing your taxes to May 17th. The IRA deadline would be delayed as well. But they actually had to look for the legal justification and so on and so forth, and they found it. And so for Roth IRAs, traditional IRAs, HSAs, and a few other things, the deadline has moved from April 15 to, to May 17. So you have a little bit longer to make those contributions.

[B]

Now, the IRS also said just this week that COVID 19 protective equipment like face masks and hand sanitizers are tax deductible for 2020. That could mean some sizeable deductions for some people.

[C]

Yes, it could. It's a little bit complicated because in order to get a medical expenses deduction, you have to have expenses that are greater than 7.5% of your adjusted gross income. And that is a really high hurdle for a lot of. On the other hand, some people get over it because they have great big medical bills or somebody's in a nursing home or something. And once you're over that threshold, there's a whole range of expenses that are not reimbursed by insurance that are deductible for tax purposes. And now we know that PPE and Covid supplies and things like that are on the list. That doesn't surprise me at all.

[B]

Okay, so a lot of little changes here. So if people do discover that these changes might alter the numbers on a return that they have already filed, how do they go about remedying that?

[C]

Well, that's a hard question. You don't have a lot of great options. You can amend your tax return and there's a difference. If you change it before the due date, which is May 17, or after the due date, which is May 17. And so before the due date, it's usually called a corrected return, but there's a different set of laws and things that applies. You know, if you're going to do this, you probably need to be talking to a tax professional, a complicated area.

[B]

And Laura, dare I ask any more changes you might be hearing about coming down the pipe?

[C]

Well, one of the really important ones that we're only starting to get information about is that in March, Congress exempted the first $10,200 per recipient of unemployment payments. Usually these are totally taxable, but they're not taxable for 2020. And so everybody's scrambling to figure out how that's going to work. If you've already filed your tax return, you have to be aware of what the IRS is, the guidance they are going to release. They haven't released it yet. They hope they're going to make an automatic adjustment and send people a check if they deserve it. If you haven't filed your tax return, the IRS has put out a worksheet and the tax software companies are incorporating that into their software about how to claim that $10,200 deduction. And I'll pat the Wall Street Journal on the because we learned that the way that the IRS was doing that was not so favorable to taxpayers and that it didn't really agree with what the law said. And we asked about it and they told us they changed it so more people qualify for this deduction.

[B]

All right. That's Wall Street Journal tax reporter Laura Saunders. Laura, thanks for coming on the show

[C]

and thanks for having me.

[B]

And that's your Money briefing. I'm J.R. whalen for the Wall Street Journal.

[A]

This podcast is brought to you by reliaQuest. Cybercriminals are constantly attacking. They want your data. They want your identity. They innovation. ReliaQuest fortifies your business with agentic defense AI that detects, contains and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliaQuest agentic defense for the enterprise. Learn more at reliaquest.com that's R E L I A Q U E-S-T dot com.