Things You Need To Know About Tax Time
The pandemic has caused some new tax concerns when filing your 2020 returns that you need to know about or it may cost you.
I was wondering with all that went on in 2020 with the pandemic, layoffs, unemployment and stimulus checks if these could effect your income tax returns and it looks like that is a big fat yes.
There is a lot on the tax plate this year that you need to know about and the first thing is the IRS is not accepting returns until February 12.
WOOD has listed a host of information regarding filing your taxes this year according to the IRS:
Unemployment - if you received unemployment benefits, they are taxable income and hopefully you are not just finding this out now. Your first round of benefits don't require federal taxes to be withheld but that can change if you received extended benefits.
Relief Checks - this is a big one because most people got a check and the good news here is these checks are not taxable income. If something was jacked with your payment and you didn't get the right amount you can make a claim of the Recovery Rebate Credit on your taxes. You don't have to worry about taxes at the federal level but some states will tax this income.
Home Office - if you had to work from home and had to buy some new stuff so you could work at home, unless you own your own business, you won't be able to claim any expenses on your taxes since you work for someone else.
Tax Credits - a temporary lookback provision was put in place by congress that will allow taxpayers to use your 2019 or 2020 income in regards to claim the Earned Income Tax Credit or Child Tax Credit. Keep in mind the less you earned the larger your credit will be.
Investing - if you were gambling on the stock market in 2020 and new to the game, there is a tax obligation you need to know about. So if your stocks went up, you won't have to claim the taxes on the money you made until you sell them. If you sold stocks at a profit within the year, be prepared to get hit harder with taxes.
Fraud - a lot of people scammed the system when it came to receiving unemployment benefits. If you received a Forms 1099-G and you didn't claim for unemployment you will need to contact the state of Michigan to get that cleared up and the early you take care of this the better.
Gig Work - if you started doing a side business to make ends meet, be ready at tax time because the rate of self employment is higher and you have to come up with that at tax time.
Charity - there was a lot of charity that was offered up in 2020 and if you were one of those donating cash you can deduct up to $300 for charity even if you don't itemize your return.
The only I couldn't find our regarding taxes for 2020 is if you are able to claim things that were canceled because of the pandemic. For those self employed that is a huge loss if you cannot so my suggestion would be to contact a local tax person to get that anwer.
While most Michiganders just do the standard form to do their taxes, you may want to consider hiring someone this year and itemize your tax return. A tax preparer's knowledge is very valuable during times like these and can either help you get a better refund or better yet, not have to pay as much.