The COVID-19 pandemic has changed how you file your taxes this year. Here’s what you need to know.
It’s already that time of year again—tax season. Filing for yourself or a business can already be a complicated process full of paperwork and payments, but this year figuring out the financial headache of your tax return is even more convoluted due to the upheaval caused by COVID-19.
First thing’s first, the federal income tax filing deadline, or Tax Day 2021, has been pushed back a month, from April 15 to May 17. Additionally, the state tax deadline for Louisiana residents was recently extended to June 15. "This gives individuals affected by the winter storms earlier this year more time to file," says BSF CFO and Executive Vice President of Operations Jim Chaffin. "However, if you already have your documentation prepared, you should still file as soon as possible."
Here are five more things to know about how filing taxes for 2020 will be different because of the pandemic.
Last year, a record 23.1 million Americans filed for unemployment in April alone. If you filed for unemployment you'll receive a 1099-G form, which lists the total amount of benefits you received and any that were withheld. Normally, unemployment checks are considered taxable income. But under President Biden's new stimulus package, the first $10,200 of unemployment benefits will not be taxed for people who make less than an adjusted gross income of $150,000.
The good news is that if you received a stimulus payment in 2020, those funds are not considered taxable income, and consequently will not impact your return. If you were eligible to receive stimulus funding through the March 2020 CARES Act or the December 2020 stimulus bill but you never received all or part of those payments, you can still claim them as a Recovery Rebate Credit on your 2020 tax return. This means you'll either receive a larger tax refund, or that the amount of taxes you owe will be lessened. The IRS's Recovery Rebate Credit Worksheet can help you determine whether you're missing a payment and, if so, for how much. For more information about how the 2020 Economic Impact Payments affect your return, visit the Internal Revenue Service's coronavirus tax relief page.
Home Office Deduction
Before the Tax Cuts and Jobs Act of 2017, under President Trump, you could deduct things like your internet or electricity bill if you had to work from home sometimes, for your employer. But you cannot deduct these expenses anymore. That's bad news for all the people who had to relocate from their offices to their living room. However, if you're self-employed or you have a side gig, like driving for Uber or freelancing, you can deduct certain work-related expenses on your tax return.
If you moved to a new state during the pandemic, remember to file tax returns in both states. The requirements for filing differ from state to state, so make sure you're clear about what you need for each. Depending on your circumstances, you may need to clarify whether your move during the pandemic has been temporary or permanent. That may affect how and where you file.
If You Have Children
Part of Biden's stimulus package also increases the Child Tax Credit to $3,600 if you have children under six, and $3,000 if you have children who are six through 17.
To learn more about how Bank of St. Francisville can help, call 225-635-6397 or click here to schedule an appointment. To get more financial literacy tips and tricks like these in your inbox, sign up for our monthly e-newsletter here.