Some IRS changes benefit, others don't for 2020 taxes
Posted February 2, 2021 6:20 p.m. EST
Updated February 2, 2021 6:54 p.m. EST
The coronavirus pandemic could impact your 2020 taxes after the federal government made multiple changes last year.
One change means things that some would expect to deduct are now off limits. For example, because of the pandemic, many people worked from home most of 2020 and set up home offices, but they don’t qualify as a home office for tax purposes.
"The home office deduction used to be available to employees. However, in 2018, that was eliminated as a deduction," said accountant Mele Perrego.
Perrego said the same thing goes for internet and phone costs, which can be deducted only if you actually run a business from your home.
Some of the roughly 1 million North Carolinians who collected unemployment in 2020 might be surprised to learn that income is taxable. If you didn’t withhold taxes when you received the money, you’ll need to work out how much you owe when you file your taxes.
Perrego said those who were self-employed in 2020 may qualify for a new tax credit: Form 7202 for sick leave and family leave.
"Their children were home from school, no day care, whatever the reason may be that they weren't, if they were not able to work or telecommute for work, they may be able to get this refundable credit," explained Perrego. "It may be $100, or it may be quite a bit more."
Another change approved in late December allows those who qualify to use either their 2019 or 2020 earnings, whichever benefits them the most, for the Earned Income Tax Credit.
Also, those who had to take money out of a retirement account before the allowed age of 59 may not have to pay the 10 percent penalty for early withdrawal.
Keep in mind, because of the late December changes, filing season is delayed until Feb. 12.