According to the law, unemployment benefits must be reported and taxed truthfully along with other tax returns, otherwise they will be considered by the IRS as concealed income.
In view of the impact of the Chinese Communist virus (Wuhan pneumonia) Epidemic across the United States, tens of millions of workers have lost their jobs and many people have switched to work at Home. The federal government has offered a series of economic relief benefits for this reason, making the 2020 tax returns very different from the previous ones.
The Internal Revenue Service (IRS) will be open to the public this Friday (February 12) to file their personal income tax returns for the year 2020, with the deadline remaining unchanged at April 15. The IRS expects that more than 150 million individual tax returns will be filed this year.
Next, hurry up and see the top 10 priorities for 2020 tax returns.
- Epidemic Relief Checks
Any money received by individuals from the IRS and Treasury in the form of direct payments is not subject to income tax and is considered tax-exempt income under the rules and is eligible for a refundable tax credit.
The $1,200 relief check provided by the CARES Act, the $500 relief payment for a child, and the second $600 relief check are all tax-free income.
If you are a U.S. person and did not receive federal stimulus cash, or any relief checks, then you are eligible to claim a refund through the Recovery Rebate Credit on your 2020 Form 1040, or Form 1040-SR.
If you do not receive a full refund, you may also be able to claim this benefit.
- Unemployment Taxes
Many people who lost their jobs in 2020 are eligible for expanded unemployment benefits, but these benefits count as taxable income under the rules. While not every state taxes unemployment benefits, the federal tax rules apply across the board.
The IRS requires taxpayers to report income received in the form of unemployment. Failure to report unemployment benefits on a tax return or for delinquent tax payments can result in penalties and interest being added by the IRS.
These taxes are not automatically withheld. Unemployment income and taxes withheld will appear on a 1099-G return, which is usually mailed at the end of the year.
Taxpayers may have a flat 10% federal tax rate withheld from their wages.
If you do not have taxes withheld from your unemployment check, then quarterly estimated payments will need to be made to the IRS. These payments are usually required for individuals who expect to owe $1,000 (or more) in taxes at the Time of filing.
- Deferred Payroll Taxes
Some U.S. workers were deferred from paying payroll taxes during the last four months of 2020 under former President Trump (Trump).
Payroll taxes are paid separately from federal income taxes. Payroll taxes usually include a share of Social Security and Medicare taxes, which are 6.2% and 1.45% of wages, respectively.
Under recent IRS guidance, these deferred taxes are repayable, and affected workers will have the entire year 2021 to repay these deferred obligations.
- Tax Breaks for the Paycheck Guarantee Program
In late December, the government provided that all ordinary and necessary business expenses paid with an exempt Payroll Protection Plan (PPP) are fully deductible.
- Can I claim an offset for working from home?
Probably not.
Home office deductions only apply to self-employed people. Therefore, if your company sent you home for most of the last year, you cannot claim your home office expenses or any utilities.
However, if you are self-employed and your income is reported on a 1099 instead of a W-2, then you can claim an offset for home expenses that you used exclusively for work.
- I have to withdraw money from a 401(k) or IRA, do I have to pay taxes on it?
Last year, the CARES Act allowed people under age 59½ to withdraw up to $100,000 from their retirement plans without penalty.
If you are one of those people, then you must pay taxes on the money, but the news isn’t all bad. If you put the funds back into your account within three years, you can get a tax refund.
- is it worth reporting a charitable contribution tax deduction?
Charitable donations, after the sweeping changes to the tax code in 2018, seemed like a headache when it came to tax deductions. But the CARES Act gives them some relief because of the epidemic. The bill allows deductions of up to 100% of adjusted gross income, but only if you itemize the deductions (itemize the deductions).
If you take the standard deduction, you can deduct up to $300 in cash.
- Should I file my taxes early?
If you make less money in 2020 than you did in 2019, it would be a good idea to file your taxes early, whether you owe taxes or not. Filing your taxes at a lower amount can help you get a bailout check in the future.
- Annual income thresholds for filing taxes
People who are single and under the age of 65 need to file a tax return if they earn $12,400 or more per year. If you are 65 or older, the minimum annual income threshold jumps to $14,050.
For married people under 65 filing jointly, the threshold is $24,800. If both partners are over 65, it jumps to $27,400. If one spouse is younger than 65 and one is older, it is $26,100.
Heads of household who have not yet celebrated their 65th birthday are required to file if their income exceeds $18,650. If older than 65, the income threshold jumps to $20,300.
Finally, widows and widowers with dependent children under age 65 will need to file if their income exceeds $24,800. For widows and widowers over age 65, the income threshold is $26,100.
- Not ready when the tax filing deadline arrives?
The easiest way is to file electronically through Free File, which will extend your filing date to October 15. Or get an automatic 6-month extension by using IRS Form 4868.
Special rules apply to personnel serving in the Armed Forces in a combat zone or contingency operation, or who are hospitalized as a result of injuries sustained in such an area. These individuals have 180 days after leaving the area to file and pay their taxes.
If you are more than 60 days late in paying your taxes, you may be subject to a minimum penalty of $210 (unless you owe less than that, in which case the penalty is 100% of the unpaid taxes). Otherwise, the penalty can be 5% of the unpaid tax each month until you pay it, up to a maximum of 25%.
Late payment penalties are generally 0.5% of the monthly unpaid taxes, but can be as high as 25%. This amount can be significantly reduced if you reach a payment agreement with the IRS.
Recent Comments