Filing your taxes every year presents a lot of stress in the average American. Keeping the numbers, the forms, and all of your information straight can drive people up the wall under the best circumstances. When you throw a world-altering pandemic into the mix, people are presented with new challenges and sources of anxiety this coming tax season. The pandemic and related shutdowns have altered millions of Americans’ lives, and their taxes will showcase some of that change. While it is understandable that people are dreading filing their taxes in this strange and tumultuous year, getting advice from the tax return specialists at Superior Tax Services can help reduce some of the anxiety you feel this year!
The following infographic provides a brief glance at some of the most important factors you need to consider this upcoming tax season:
How Unemployment Affects Your Taxes
One of the most widespread and unfortunate side effects of the national shutdown was the millions of Americans who lost their job. As a record number of people began filing for unemployment benefits, there are aspects to the unemployment process that people may not have been aware of beforehand. One such aspect revolves around unemployment benefits being considered as taxable income. Workers are not required to withhold taxes on their unemployment benefits. While all unemployment benefits are subject to federal taxes, not all states tax these benefits, so research to determine which side of the issue your state falls on is critical.
If you unintentionally forget to claim your unemployment benefits on your taxes, the IRS will respond in kind. Filers who forget are subject to a tax bill, potential penalties, or interest charged by the IRS to recoup the missing claims.
However, part of the fallout from your unemployment this year isn’t necessarily all bad news from a tax perspective. Due to your household’s reduced income brought in this year, you may be eligible for deductions and credits that they did not qualify for previously. The size of these credits will vary based on how much income was lost.
The Reality of the Relief Checks
Thanks to the CARES Act, Americans received a $1200 check per adult and 1 $500 credit per child from the government. This relief money aimed to alleviate some of the financial burdens that the pandemic placed upon American families. The good news for those that received their relief checks is that the money is not taxable and does not go against your 2021 taxes. The reality of the relief checks that people may not have realized is that they were an advanced payment of the Recovery Rebate Credit for 2020. If during the year, you did not receive the full payment for whatever reason, you can resolve the issue on the upcoming 2021 taxes. If you received more than $1,200 in relief funds, no need to worry; you will not owe anything to the IRS for the overpayment.
The Working from Home Deduction Conundrum
People who could keep their jobs during the pandemic but switched to primarily remote work may have heard about a possible home-office tax deduction. Unfortunately, most people will not be able to claim this deduction on their upcoming tax return. Only businesses and self-employed individuals can claim this deduction. For employees that have made the transition for their company, they are unfortunately not eligible for this deduction. Those people that qualify or are claiming the deduction for the first time must prove that their desk and workspace are used exclusively for work and that it does not serve another function within their home.
When Do I Have to File My Taxes?
The IRS has not released the filing date for when people can begin to file their taxes. However, the deadline for submitting their taxes is April 15th. Contact Superior Tax Services to schedule an appointment with an experienced tax professional. Get started on making sense of your 2021 taxes today!