The IRS has extended the deadline to file your 2020 federal taxes is May 17, 2021, but due to the coronavirus pandemic, tax filers must consider four income sources when preparing 2020 returns. These distinct types of income create many questions regarding how they will impact 2020 tax returns.
- Working-from-home (WFH) became more of the norm than the exception
- The federal government distributed stimulus checks
- Supplemental payments were added to state unemployment benefits.
- Freelance workers soared to 40 percent of the U.S. workforce
- Employees – The Tax Cuts and Jobs Act (TCJA) signed into law in 2017 made deductions for unreimbursed business expenses obsolete from 2018 to 2025.
- Self-Employed – The TCJA did not impact any IRS rules related to self-employed people with a designated home office. Review Schedule C (Profit or Loss from Business) Part II for a list of deductible expenses.
2020 Stimulus Payments:
- Not Taxable – According to the Economic Impact Payment Information Center on the IRS website, stimulus payments are considered tax credit and not a part of gross income.
- Non-receipt of full stimulus payments – Filers who did not receive the full stimulus payments due in 2020 can claim the Recovery Rebate Credit. Stimulus payments were made based on 2018 or 2019 tax year information. Individuals with considerable drops in income or who had a baby during 2020 might also be impacted.
- Most unemployment payments are taxed and those who received unemployment payments should receive Form 1099-G – Certain Government Payments showing the amount of unemployment compensation paid in 2020. Visit the Interactive Tax Assistant to confirm if your unemployment payments are taxable or not.
Charitable Donations and Contributions:
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows 2020 filers who do not itemize tax returns up to a $300 deduction for charitable donations and contributions made in 2020.
For more information about filing 2020 tax returns, visit https://www.irs.gov/forms-pubs/about-form-1040. Cincinnati non-profit free tax preparation services or a Black-owned accounting firm may assist in filing 2020 tax returns before the deadline on April 15, 2021.
Cincinnati non-profit resources assist in preparing 2020 tax returns:
United Way of Greater Cincinnati Free Tax Prep
Eligibility: Low to moderate-income residents
Cincinnati Hamilton County Community Action Agency No-Cost Tax Prep
Eligibility: Low-income working individuals and families
Cincinnati Black-owned accounting firms assist in preparing 2020 tax returns:
Apro Accounting and Tax Services
Phone: (513) 448-1280
Al Riddick is President of Game Time Budgeting, an award-winning financial fitness company that helps others develop behaviors to improve their short- and long-term financial outcomes. He is the author of The Uncommon Millionaire and two workbooks: The Uncommon Millionaire’s Guide to Financial Fitness and Money $mart Teens. Also, Al has been featured on NerdWallet, in Black Enterprise and Money magazines, on radio and on ABC, CBS and NBC affiliated television stations.
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