Tax season is officially here. Because of the pandemic, filing this year can be tricky. That’s why experts say you need to do it now.
“2020 tax returns will be like nothing most Americans have seen in decades,” said Mark Steber, chief tax information officer with Jackson Hewitt.”
He says the combination of the pandemic, new tax laws, and unemployment could make this a challenging tax season.
During this pandemic so many people lost their jobs or were laid off or furloughed.
“Life changes drive more changes on a tax return than tax laws ever do and being unemployed or having a change to your income stream is one of the biggest life changes,” said Steber.
Dealing with unemployment is a tricky situation in a normal year. But keep this in mind “the first thing to remember is unemployment benefits are fully taxable,” added Steber. “They go on your tax return just like any other income. If you leave it off odds are the IRS will know and you’ll get one of those terrible notices and maybe even an assessment.”
Also important to remember, unlike regular income, unemployment taxes are not withheld automatically.
“Being unemployed or being self employed certainly different than a prior year and not all bad but it is something you need to pay particular attention on your tax return because there might be new benefits, there might be new deductions, there might be new reporting options that can lower your taxes and get you a bigger refund but you have to know how to handle it or use a tax pro who does,” said Steber.
The stimulus checks you received are not taxable, and that COVID relief package offered other benefits too.
“There are some lookback provisions for earned income tax credit that could help out. There are a lot of really good provisions in there,” noted Steber. “But they came late and they absorb a lot of different elements so make sure you understand them or your tax pro does so you don’t miss a tax benefit because there was a lot in that big bill and not just a stimulus payment and not just tax changes but a lot of other things as well.”
Steber says especially this year you should file as early as you can for three simple reasons.
“If you’re due a refund you get that money faster by filing early, it also protects your documents and information. If you file early, you lock up your information with both the IRS and the state so somebody can’t go steal your refund. But thirdly, the most important reason for this year if you do have some sort of refund shock and you’re getting less money you need to know that early so you can adjust.”
It’s important to remember – just because you file early, doesn’t mean you have to pay early. Any money you owe is due April 15.