How Covid-19 aid money can affect your taxes and what you can do about it
The tax return is there and you may be wondering how the pandemic is affecting your returns. Many filers have many more questions about their taxes this year than in the past.
“This particular tax season is all about organization, especially given what was given to aid Covid last year,” said Sheneya Wilson, CPA and founder of Fola Financial.
We spoke to several tax professionals for answers to frequently asked questions and tips on what to do before filing your 2020 income tax return.
Here is question # 1:
Are stimulus checks taxed?
Are unemployment benefits taxable?
Unemployment benefits are always taxed on your federal declaration, said Kelley C. Long, CPA and one of the AICPA’s consumer finance lawyers. “Even the additional $ 600 weekly payment is taxed.”
“If you haven’t withheld tax, you have to pay tax on it,” she said. “But there are some states that don’t tax unemployment benefits, and some only tax part of it.”
Does a PPP discharge have to be reported?
Small business owners who have received a loan under the Payment Protection Program and are eligible for a loan should ensure that the information provided to obtain this relief matches what they provide on their tax return.
“If your returns don’t match the reported ones, you can trigger an audit for 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, even business expenses paid for with loan money are tax deductible.
Finally, be sure to submit your return early, especially if you are receiving a refund or a refund credit.
“If you made less money in 2020 than you did in 2019, you’ll definitely want to file early to make sure you get your stimulus checks, checks owed, or future checks that have yet to be approved,” said Wendy Barlin, CPA and Founder Benefit from About.
What if you owe Uncle Sam money?
“You can now file your taxes even if you owe something,” Long said. “But you don’t have to pay until April 15th.” This remains the deadline for filing your income tax return for 2020.
For more information on tax tips, see The news with Shepard Smith TODAY at 7 p.m. ET.
SIGN IN: Money 101 is an 8-week financial freedom learning course delivered to your inbox weekly.
CHECK: 3 Money Moves Helped Me Save $ 100,000 By The Age Of 25, Break Your Budget Blogger says via Grow with acorns + CNBC.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.