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LOS ANGELES (CBSLA) — There are some big changes this tax season that could make the experience a little less painful and might even put a little more cash in your pocket.
“The tax return is just the biggest financial event for most people,” Nathan Rigney, H&R Tax Analyst says.
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Rigney, a principle tax research analyst, says that nearly everyone will be impacted by this year’s tax changes, and said there are five main shifts that people need to know about before filing.
1. How should I report my unemployment benefits?
“If you received unemployment benefits in 2020, that income is taxable,” Rigney says. “You’ll generally receive a 1099G from your state agency reporting all of the unemployment benefits that you received during the year. Now, you may have elected to have some taxes withheld from those unemployment benefits. If you did, great. If you didn’t, your refund may come down a little bit.”
2. Will I have to pay taxes on my stimulus check, and what should I do if I was eligible but did not receive mine?
“The first answer there is your stimulus payment is not taxable,” Rigney says. “However, if you didn’t receive all that you were entitled to — maybe you had a child during the year, maybe you didn’t receive your payment for one reason or another — you can claim the excess payment that you’re entitled to as a refund on your tax return.
3. What about expenses I incurred while working from home?
“This year, millions of people are working from home and the first question is, ‘I have a lot of expenses, can I deduct those on my tax return,’” Rigney says. “And on your federal return, the answer is no. California, however, does allow you to deduct those expenses on your state return.
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“If you’re self-employed, it’s different. You can deduct those expenses on your federal return and your state return.”
4. What if I worked a side gig during the pandemic?
“That’s self-employment income,” Rigney says. “As so for a lot of people who are doing this for the first time, they’re going to discover that it’s a lot more complicated to file your taxes than it is with just a W2.
“So if you haven’t been making quarterly estimated payments, when you go to file your tax return, you discover that you have a pretty big balance due in some situations.”
5. What if I received a Paycheck Protection Program loan?
“We now know that the expenses that you pay with the PPP loan proceeds are deductible,” Rigney says. “The other question we get around the PPP is when it’s forgiven, is it taxable? No, it’s not taxable.”
In addition to those tips, Rigney says that people with children need to look into the additional child tax credit, which may reduce their tax bill even further. Though, he says, there are no tax benefits for homeschooling.
“This year in particular, it’s very important to get in, make sure that you claim all the benefits that you’re entitled to and make sure that you’re benefitting from that as well,” Rigney says.
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Rigney also says that it’s important for people to get help filing if they have questions and to get their returns in early and information on file with the Internal Revenue Service, that way if another round of stimulus payments are approved, the money will arrive quicker.
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