The tax return season has arrived and you may be wondering how the pandemic is affecting your return. Many applicants have many more questions about their taxes this year than in the past.
“It’s all about organization for this particular tax season, especially due to providing Covid aid last year,” said Sheneya Wilson, CPA and founder of Fola Finance.
We spoke to several tax professionals for answers to frequently asked questions and tips on what to do before filing your 2020 federal income tax return.
Here is question # 1:
Are stimulus checks taxed?
Is unemployment benefit taxable?
Unemployment benefits are always taxed with your federal declaration, said Kelley C. Long, a chartered accountant and one of the AICPA’s Consumer Financial Education Advocates. “Even the additional weekly payment of $ 600 is taxed.”
“If you haven’t withheld tax, you have to pay tax on it,” she said. “But there are some states that do not tax unemployment benefits and some only part of it.”
Does the PPP discharge have to be reported?
Small business owners who have received a payment protection loan and are eligible for loan waiver should ensure that the information provided to obtain this relief matches what is provided on their tax return.
“If your returns do not match the reports, you can initiate an audit yourself,” said Wilson. “So you want to make sure your returns are consistent.” Document your expenses. Keep a good record of your income. And remember, business expenses paid with loans are tax deductible too.
Finally, be sure to submit your return early, especially if you are entitled to a refund or a refund credit.
“If you made less money in 2020 than you did in 2019, you definitely want to file this early to make sure you get your stimulus checks, past checks, or future checks that have yet to be approved,” said Wendy Barlin, CPA and Founder of About Benefit.
What if you owe Uncle Sam money?
“You can now file your taxes even if you are in debt,” Long said. “But you don’t have to pay until April 15th.” That remains the deadline for filing your 2020 federal income tax return.
For more information on tax tips, see The news with Shepard Smith TODAY AT 7PM ET.
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