It is almost time to file taxes for the year of 2020 and of course there are some things that are different about that year, so I wanted to take the time to put them together here.
One of the biggest things that is going to be necessary for some to know is that unemployment compensation is taxable. Lockdowns put many out of work for the first time and this compensation helped many of those people get through that period. A number of them, however, will not have realized that taxes were not coming out of that money, so consider this a warning if you are in that situation - you may have a significant amount of income still to pay taxes on.
Also, if you are someone who turned to the gig economy for the first time to cover 2020’s unexpected bumps in the road, that is more money that most likely was not already taxed. Many in this situation are served well by making quarterly payments to the IRS. It is obviously now too late to do that for 2020, but it could then be a good idea to get your taxes done early (even if you put off filing immediately) to find out exactly how much you will owe and igure out how to get it together.
New situations in 2020 were not all bad, though (and how many times was that ever said about that year of years?). Many may have been using a home office during those times and that opens you up to a deduction you may have been unaware of. Granted, this is not a deduction that you qualify for if you currently work from home but exclusively receive a regular paycheck and/or W-2. If you are self-employed or doing any sort of gig work from home, though, this is something you should investigate.
No matter whether you itemize deductions or not, everyone qualifies for up to a $300 deduction for charitable contributions. That $300 is the cap for those not itemizing deductions, not a limit that had to be reached. If you gave less than that, still gather that information together. For even if it is not a giant deduction, it is still something. And shouldn’t the year give us something?
Finally, if you received an economic stimulus payment in 2020, this information needs to be on your tax return. This money is not taxed itself but there is essentially a check to see that you received what you should have. Paperwork was sent to those who received these payments, but that started many months ago now, and we understand that many either did not save this or now don’t remember where they placed it. You can still track what you received, though, through the IRS’s get my payment page. Be forewarned, this is not necessarily an easy and smooth progress that happens on one page (and if you are married filing a joint return, you and your spouse both need to do this), but this is another point where if you get it done now, you avoid a time crunch and aggravation.
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