With all of the changes 2020 has brought, some of them may apply to your taxes.
DENVER – Tax season is just around the corner and with the changes in 2020, many are wondering what that means for their taxes.
Three things to keep in mind when submitting this year:
- Unemployment benefit
- Stimulus Paychecks
- Work from home prints
Amanda Hill, Jackson Hewitt franchisee, gave us a rundown of what we should know before filing this year.
File earlier this year
Don’t hesitate to file taxes this year.
“There are certain loans that will take longer to process this year. There are certain things that will hinder the processing of your refund, ”said Hill. “The sooner you submit, the sooner you will come in and the sooner you will get into the process of getting your refund back.”
By submitting online early and providing information on direct deposit, the third stimulus check will be faster.
“Some of the issues we saw with the first two failed stimulus tests are that the IRS doesn’t have updated information for people. When these stimulus tests went out, many of them went to the wrong places because people don’t have them [tax records] updated, ”said Hill. “If you file your tax return regularly and submit it as soon as possible, the system will be updated as soon as your tax return is processed. Then you can make sure you get whatever comes out of it. “
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Unemployment is taxable
Those who became unemployed in 2020 must make sure they have a 1099-G form while filing taxes. This document will be sent to applicants detailing the number of unemployment benefits paid during the year.
“The biggest misnomer that people don’t understand is that unemployment is taxable,” Hill said. “So it has to be on your tax return and a lot of people miss that.” You didn’t think it was taxable or that it had to be included, but it does. “
People who received stimulus checks in 2020 must include this in their taxes. But don’t worry, stimulus payments are not taxable.
On the other hand, people who were eligible for stimulus payments and received neither or both can indicate so when filing in order to receive these payments.
“The IRS wants to make sure everyone gets the full amount they are entitled to,” Hill said. “So if someone didn’t get one or the other or both, we can use what are known as refund credits on your 2020 tax return on your tax return, and we will disclose the stimulus amounts or the portion that you shouldn’t have received on your return to have. And that way, you’ll get the full amount of your stimulus payments for the two payments that have already expired. “
You can find the Recovery Rebate Credit on line 30 of your 1040 tax form.
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Deductions for the home office
Many people have been working from their home offices or couches since the pandemic began. And these may be wondering if working from home and using their own supplies is deductible.
“If you’re a W-2 employee, you can’t deduct anything. However, when you’re self-employed there are deductions you make on your business return, “said Hill.” And when I say business return, I am using that term lightly because when you are self-employed and work from home, you put on what is called a Schedule C that takes into account your business income and expenses. ”
Documents you need to archive
Here’s a breakdown of some of the common forms people may need to file taxes.
W-2. Accountants must include a W-2 for all jobs that have worked, even if they only worked for a week. Contact this employer if you would like a copy.
“Everything is already reported to the IRS so they already know you received it. If you omit it or remove something from your tax return, it will only delay processing your refund,” Hill said.
1099-G. Unemployment is reported on a 1099-G.
“If you get both the state and federal portion in the state of Colorado, you get a 1099 G reporting both portions. However, there was a second federal unemployment rate that is earmarked separately for a second 1099-G so you can get two and need both to file your return, ”Hill said.
1099-NEC. Formerly known as 1099-MISC (miscellaneous). Self-employed tax accountants, freelancers, contractors, or part-time workers who have earned $ 600 or more can now receive Form 1099-NEC (Non-Employee Compensation). This includes gig work like Uber, Doordash or Instacart.
1099-B. Those who have sold stocks, bonds, derivatives, or other securities through a broker can expect a Form 1099-B. Profits or losses from such transactions are shown here.
1099-R. This form is used to report the distribution of retirement benefits such as annuities and annuities. People would get this form if they received an allocation of $ 10 or more from their retirement plan.
“If you had to close your retirement account specifically for COVID-related purposes, you can spread your distribution over the next three years. So next two this year, ”said Hill. “So it kind of helps break the tax liability of having to withdraw the money from your retirement account.”
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