How Will COVID-19 Affect Your Taxes?
As if 2020 weren’t enough on its own, there’s one last thing we have to deal with before we can say goodbye to it forever: our taxes. This year, thanks to the stimulus checks, small business loans and unemployment income, your taxes might be a lot more complicated than you’re used to. Here’s how COVID-19 might affect your taxes in Union City, NJ.
If you got a stimulus check from the government last year, you’re probably wondering if you have to pay taxes on it. Here’s the good news: it’s not considered taxable income. Instead, it’s considered an “advance” on whatever refund you might have received this year. Since there’s a new stimulus check in the works, it’s advisable to file your taxes as soon as possible. People who qualify and file electronically will get their refunds or recovery rebates in as little as a few weeks.
However, if you made more money in 2020, which could jeopardize your stimulus eligibility, it’s best to wait as long as possible to file. Your eligibility is based on your most recent tax return, so if 2020’s income will knock you out the running, you might wait until the new stimulus checks have been issued.
Unemployment benefits are indeed taxable, so we hope you had taxes withheld (or set them aside yourself, if possible). This does include the additional $600 per week unemployed people claimed under the CARES Act. If you have questions about whether your unemployment benefits are taxable, be sure to visit this IRS webpage to find out more.
If you’re one of the many people who had to scrape by in 2020, and couldn’t afford to set aside taxes, you might be looking at a hefty tax bill. Remember, don’t avoid filing your taxes or procrastinate until after the deadline. Instead, file your taxes and call the IRS to set up an affordable payment plan. They are happy to work with you as long as you can set a reasonable schedule.
If your small business received a PPP loan to stay afloat, you can deduct qualifying expenses from your taxable income—but be sure to talk to your accountant so you claim the appropriate amount.
Home office deductions
If you’re tempted to claim a home office deduction, make sure you consult an expert first. Even if you’ve been working at home for the majority of 2020 and beyond, you can’t just call it a home office. There are very specific requirements in order to qualify for this deduction, and it’s something of an audit magnet. Make sure you qualify before trying to claim this on your income taxes. An accountant can help you decide whether you do, and whether it’s worth claiming compared to any potential risks.
Although COVID-19 has made taxes more complicated this year in Union City, NJ, help is available. Call Kedean’s Generation today to work with professional, highly-skilled accountants. We’ll make sure you can claim the maximum amount of qualifying deductions on your taxes.
Categorised in: Tax Preparation