Income tax filing season is right around the corner and there were a few things that happened in 2020 that may alter your tax liability.
“Because of the stimulus payments, because of the COVID-19 relief for small business owners, and unemployment. I think this is the year that if you typically do it yourself that you may want to hire a tax professional this year,” Amber Whitehead said.
Whitehead of Whitehead Tax and Financial Services in Vernon said there were so many ways in which the government stepped in to help this year that it would be wise to ask for help accounting for it.
Hundreds of thousands of people lost their jobs in 2020 due to the pandemic so what happens with that income?
“There were more people on unemployment this year that were probably never on unemployment before and unemployment is taxable,” Andrew Lattimer said.
Lattimer, a principal in Clifton Larson Allen, said many people may not realize that unemployment is taxable.
“All of a sudden they’re going to get a form 1099-G and it’s going to say ‘Hey, you have taxable income on the unemployment benefits you got’,” Lattimer said.
Whitehead says if the form doesn’t come in the mail and the individual was filing for benefits online then they can download the form online.
What about the stimulus payments?
“The stimulus payments are not taxable to you,” Whitehead said. And if you haven’t received one you will get it when you file your taxes.
“If you didn’t get a stimulus payment on your 2020 tax return there’s going to be a form to fill out to figure out whether you should have gotten it,” Lattimer said.
The pandemic forced many people to work from home, and that’s also raising questions. In some cases their employer is in another state. Now what?
“So the question has been when you’re working remotely and the reason you’re working remotely is because the Connecticut office isn’t open or they’re allowing you to work remotely where should your wages really be sourced,” Lattimer said.
The two states may have to argue over it.
“Connecticut is going to argue that's Connecticut wages because it’s for a Connecticut company and there’s a Connecticut office,” Lattimer said.
“You may come into a situation where you may be paying taxes on the same income to Connecticut and New York without getting a credit.”
The IRS said that it expects 150 million tax returns to be filed before the April 15 deadline. Last year’s average tax refund was more than $2,500.