GRNAD RAPIDS, Mich. - It's that time again -- tax season! And with the impact the 2020 pandemic has had on other aspects of American life, filing the 2020 tax return could be a little different. 13 ON YOUR SIDE spoke to tax expert Phil Mitchell, president of Kroon & Mitchell -- Integrated Tax and Investments based in Grand Rapids to find out what West Michiganders should have ready when filing their 2020 taxes.
Experts agree that Americans should plan to file taxes between February 12, 2021 and the tax deadline of April 15, 2021.
“What they’re doing is updating the programming behind the scenes to cover things like stimulus checks that people need to get this recovery rebate through which wasn’t in place last year," explains Phil Mitchell. "So the IRS is suggesting that you don’t file early.”
So far, many Americans have received ‘two stimulus checks’: one in the amount of for $1200 in April 2020, and one in the amount of for $600 at the end of 2020 or beginning of 2021. If someone who qualifies for the stimulus check but did not receive one or both of the checks, they should track the money using the Get My Payment tool on the IRS website. If there is no information available to track the whereabout of either stimulus check, they should attempt to update their information with the IRS, or file a recovery rebate credit with their 2020 tax return.
“The stimulus check is technically considered a tax credit so it’s not considered income," says Mitchell. "There is something called the recovery rebate credit worksheet, and so people that haven’t gotten the stimulus checks and they should have, will need to file a 1040 return in 2020. And these may be people that haven’t historically filed a return as well. What I also tell people that are lighter on the income side, there are resources, something like a VITA which have offices across Michigan that can help low income people to file a return, so they may need to do that to get that credit.”
Many Americans have been collecting unemployment benefits in 2020. Anyone that received any amount from money from unemployment in 2020 needs to file 1099G form with their taxes.
“The stimulus check is not taxable income, but unemployment is on a state and federal level," says Mitchell. "It’s just another form, its called 1099 G, in the very first box it says unemployment compensation, that will go right into your return so if one person files and you include it for one or both persons in the household it makes no difference its almost like a W-2 for income. Its very standard and is considered your income. I wouldn’t think of it as anything different than a normal source of income.”
And for Americans who were employed in 2020 but has to create their own work from home space, they are not permitted to write off expenses like internet and office furniture. If someone believes they should be reimbursed for certain work from home expenses, their best bet is to talk to their employer directly to cover the expense.
“There used to be a section for unreimbursed business expense—like your employer doesn’t reimburse you for the internet or things you use at home, and you could file for that under itemized deductions. That was removed. So at this point people deemed to be employed with another company have no deduction there, at all," says Mitchell.
If Americans have money set aside in a dependent care account to cover expenses like daycare, but that money was not used in 2020 because of the pandemic, the good news is that the money will roll over into another account for 2021.
“They passed a new tax relief act and what it will allow you to do is roll those funds over to the next year for the full amount so no one is going to be losing anything there," Mitchell says.
American tax payers who plan to work with an expert this year to file their 2020 tax returns should expect to have a contactless experience. The CPA’s we have talked to tell us they plan to communicate with clients via zoom or over the phone, and they will send documents back and forth through the mail or through a drop-off service.
Finally, the magic word for 2021 is “patience." Recognize that businesses including tax services, the United States Postal Service and even the IRS are all dealing with their own trimmed staff and work from home challenges. So it is going to take some extra time to get tax documents processed and to get Americans their tax return money.
►Make it easy to keep up to date with more stories like this. Download the 13 ON YOUR SIDE app now.