What are 5 tips you would give to those who are filing taxes this year regarding changes and the unknown of things being so different as we seem to be facing a new norm ?
1 ) Choose direct deposit
The safest , most accurate and fastest way to get a refund is to electronically file and choose direct deposit . Direct deposit means any tax refund is electronically deposited for free into a taxpayer ’ s financial account .
Eight out of 10 taxpayers get their refunds by using direct deposit . It is simple , safe and secure . This is the same electronic transfer system used to deposit nearly 98 % of all Social Security and Veterans Affairs benefits into millions of accounts .
2 ) Earned Income Tax Credit
The Earned Income Tax Credit ( EITC ) can give qualifying workers with low-to-moderate income a substantial financial boost . EITC not only reduces the amount of tax someone owes but may give them a refund even if they don ’ t owe any taxes or aren ’ t required to file a return .
People must meet certain requirements and file a federal tax return in order to receive this credit . The EITC assistant on IRS . gov can help people determine if they qualify .
The IRS reminds taxpayers that they may elect to use their 2019 earned income to figure the EITC if their 2019 earned income is more than their 2020 earned income . For details , see Publication 596 , Earned Income Credit . Taxpayers also have the option of using their 2019 income to figure the Additional Child Tax Credit for 2020 .
3 ) Taxable unemployment compensation
Millions of Americans received unemployment compensation in 2020 , many of them for the first time . This compensation is taxable and must be included as gross income on their tax return .
Taxpayers can elect to have federal taxes withheld from their unemployment benefits or make estimated tax payments , but many do not take these options . In that case , taxes on those benefits will be paid when the 2020 tax return is filed . Taxes can be paid throughout the year . For safe and secure ways to pay taxes electronically go to IRS . gov / payments .
Taxpayers can find more details on taxable unemployment compensation in Tax Topic 418 , Unemployment Compensation , or in Publication 525 , Taxable and Nontaxable Income , on IRS . gov .
4 ) Interest is taxable income
Many individual taxpayers who received a refund on their 2019 tax returns also received interest from the IRS . The interest payments were largely the result of the postponed filing deadline of July 15 due to the COVID-19 pandemic .
The 2019 refund interest payments are taxable , and taxpayers must report the interest on their 2020 federal income tax return .
The IRS will send a Form 1099-INT to anyone who receives interest totaling at least $ 10 . The average refund interest amount is $ 18 , but the amount for each taxpayer varies based on the tax refund that the taxpayer received . Form 1099-INT will be issued no later than February 1 , 2021 .
5 ) Home office deduction
The home office deduction is available to qualifying self-employed taxpayers , independent contractors and those working in the gig economy .
However , the Tax Cuts and Jobs Act suspended the business-use-of-home deduction from 2018 through 2025 for employees . Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction , even if they are currently working from home . IRS Publication 587 , Business Use of Your Home , provides more on the home office deduction .
How can we find you online to learn more about the process of filing taxes and up to date info on filing for 2020 ?
Follow us on social media @ BartonandBoyd , visit our website at www . bartonandboyd . com
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