COVID has triggered a lot of change in the world, and will complicate your taxes this year. Be sure to get qualified, professional tax help before filing, and be ready to answer at least some of the following questions:
- Did you get your stimulus checks?
The amount of your stimulus payments must be reconciled on your 2020 Form 1040 to determine if you qualify for the Recovery Rebate Credit. The recovery rebate credit is a new addition to the federal income tax return. Did you qualify for stimulus payments but didn’t receive them or didn’t get the full amount to which you are entitled based on your 2020 income? The Recovery Rebate Credit will lower the amount of tax you owe or it will boost your tax refund for 2020. “If you didn’t get the full payment, you’ll need to claim the credit,” says Daniel Portillo, senior tax accountant for Rock & Hammer. “We can help.”
- Were you working from home, and if so —for how long?
A lot of workers who normally commuted to an office began working more often—or entirely—from home last year. You’ll need to be able to verify both your “normal” work location and your work from home location. You’ll also need to understand when your home office expenses are deductible (if you’re self-employed or an independent contractor) and when they are not. If you’re a regular employee working from home because of the pandemic, you cannot deduct your home office expenses. Further, there are different filing requirements for each state.
- Are you eligible for the Earned Income Credit (EIC)?
If you are eligible for the EIC, be sure to double-check whether it would be more advantageous to use your 2020 earned income or your 2019 earned income for the purposes of this credit—as well as for the Child Tax Credit (CTC) if you have a qualifying child.
- Were you unable to work because you required care due to the coronavirus or because you were caring for an individual who was ill with COVID?
Under the Families First Coronavirus Response Act, self-employed individuals may be eligible for sick and family leave credits if they were unable to work between April 1, 2020 and December 31, 2020 because they or a family member had the virus.
- Did you receive a Form 1099-G for unemployment compensation?
Due to scammers taking advantage of the spike in pandemic-related unemployment to use stolen information to file fraudulent claims, consider getting a corrected Form 1099-G, which covers certain types of government payments, to include unemployment compensation and state or local income tax refunds, credits or offsets—just to be safe.
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