Tax Filing Season Officially Begins
Tax filing season officially begins today (February 12), after a more than two-week delay. It's no doubt that this year's tax filing season is unlike many others. The pandemic that defined 2020 has also trickled into tax time. For starters, despite a shorter tax season, the current deadline to file is still April 15. Although the IRS has benefited from a delay, it still hasn't completely processed all returns for 2019. While the agency's staffing has ramped up, the IRS is expecting more delays.
You should also be aware that there may be many changes to your filing this year if you received a relief payment, worked from home, took on some gig work, or filed unemployment benefits.
Here's what you should know as tax season opens:
It may come as a surprise to some filers, but unemployment benefits are taxable income. You are not required to have federal taxes withheld from benefit payments. While you have the option to have it withheld, few elect to. Also, be aware that unemployment benefits are always subject to federal taxes, and in some states, state taxes as well. Note: Connecticut and Massachusetts do tax unemployment benefits.
Many have asked whether the two rounds of relief payments sent to many Americans are taxable income. Economic impact payments are not taxable income. Those who qualify for a stimulus payment, but did not receive their check, or received less than they were due, can receive the correct amount by claiming the Recovery Rebate Credit on their 2020 taxes.
Although working from home became the new normal for many last year, few can claim their home office expenses. The home-office deduction is only available to businesses or those who are self-employed. Employees are no longer able to claim any unreimbursed expenses following the last tax overhaul. In order to claim a home office, the space must be used exclusively and regularly as the principal place of business.
Taxpayers and the IRS are on high-alert this tax season due to rampant unemployment fraud. Because of the millions of people who sought legitimate unemployment benefit claims during 2020, scammers seized on the opportunity to commit identity fraud and make fake unemployment claims.
The IRS says taxpayers who receive Forms 1099-G for unemployment benefits they did not receive should contact their state for a corrected form showing they did not receive these benefits. Taxpayers who cannot obtain a timely, updated form should still file an accurate return, reporting only the income they truly received.
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