From an increase in people working from home resulting in deduction questions, to the tax status of stimulus checks, small-business loans, and other forms of financial assistance, this year’s tax season could cause an extra headache.
The IRS will begin accepting and processing tax returns for the 2020 tax year on Feb 12, nearly two and a half weeks later than last year. The reason for the delay is to give the IRS time to program and test its systems following the tax law changes that were passed in December as part of the second round of stimulus checks.
You’ve got until April 15 to file your taxes. You can file for an extension before that date if needed. Below are some answers to popular questions for this year’s unique tax season.
I worked from home for most of 2020. Can I claim a home office expense?
Home office deductions are reserved for self-employed individuals. So, if your company sent you home for the majority of last year, you won’t be able to write off your spare bedroom or any of your utilities.
Do my stimulus checks count as taxable income?
The good news is those IRS payments do not count as taxable income. The bad news? They are being treated like a refundable tax credit, so they’re similar to an advance on money you would have received as part of your refund.
Do I have to pay taxes on my unemployment benefits?
As unemployment rates soared during the early days of the pandemic, millions of people received unemployment benefits to help them get by. You will have to pay taxes on that money, and if you didn’t have any withheld when you signed up, it could be a significant amount, depending on how long you’ve received them.
I had to withdraw money from 401(k) or IRA. Will I have to pay taxes on that?
The CARES Act let people under 59½ withdraw up to $100,000 from their retirement plans without penalty last year. If you were one of those, yes, you will have to pay taxes on the money, however if you put the funds back into your account within three years, you can get a refund on the taxes you’ve paid.
When will I get my refund from the IRS?
The IRS estimates people who file as soon as tax season opens will get their refunds by the first week of March. They’re hoping to issue them as quickly as possible to help people whose jobs were impacted last year. The IRS says more than nine out of every 10 refunds are issued within three weeks of the day the return is filed. The best place to track where things stand is with the Where’s My Refund tool, which updates the status of tax refunds daily. For more useful tips, information and advice on financial empowerment, follow us on Facebook at: facebook.com/SignalFinancialFCU. We’re also on Twitter and Instagram at: @signalfcu-Written by James Fleet