The IRS deadline to file your 2020 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 – Tax 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.
- The American Rescue Plan signed into law by President Joe Biden on March 11, 2021 waives federal income taxes on the first $10,200 of unemployment benefits received in 2020.
- 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 tax 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 Iris.gov/forms.
By: AL Riddick
Al Riddick is President of Game Time Budgeting, an award-winning, Cincinnati-based financial fitness firm that that inspires others to count their money then give every dollar they earn instructions so it will behave. He is the author ofThe Uncommon Millionaire and two workbooks: The Uncommon Millionaire’s Guide to Financial Fitness and Money $mart Teens.
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