COVID-19 could complicate your 2020 tax return
Tax filers may discover that their 2020 tax return is more complicated due to the impact of the COVID-19 pandemic. Many people may wonder if they will receive the refund they were expecting.
Stimulus payments and even a second job will impact what taxes you owe as well as refunds the government may owe you.
As for unemployment income, Raleigh tax expert Ben Micham with Micham & McSwain CPAs PLLC said, "It is taxable on the federal and state (tax returns). A lot of times on unemployment, many times I see that not much is withheld. North Carolina doesn’t do a real good job about pushing to have money withheld because it’s unemployment."
Micham says stimulus payments are not taxable but warns you do need to account for the cash.
"You are not going to have money taken away, but you could get more money than you got," he said.
If you think you didn’t get enough stimulus cash, the IRS may not be aware of life changes like a new child, dependent status, or a significant change in income.
If you were affected by COVID-19, the IRS allows you to take up to $100,000 from your 401(k) or IRA, however, you will still pay tax.
"Then they can actually pay the money back within three years and file an amended return and get that money back. Also, you can avoid the penalty, normally, if you’re under 59 and a half years old, you can pay a penalty, 10% penalty, an IRS penalty, which you can avoid if it’s related to COVID-19," said Micham.
Other things to be aware of this tax season: Full-time employees of a company working from home due to the coronavirus cannot deduct their home office or any unreimbursed business expenses.
The fastest way for you to get your refund is to file electronically and have your refund direct deposited into your bank account. The IRS will begin accepting tax returns on Feb. 12.
