Welcome to what might be the most confusing tax year ever! Since we know you have questions, we checked in with experts to get you all of the answers you could possibly be looking for — and we compiled them right here. Check out our rundown on all your most pressing tax questions for 2020.
Q: What if I moved to another state during the pandemic? Will I need to pay income tax in that state or my own?
A: Short answer, yes. “When relocating to another state anytime during the tax year, if you earned income in that state (generally a certain amount), you would be required to pay taxes to that state, even if that state was not your residential state all year long,” explains Angela Anderson, JustAnswer expert and certified CPA + CFP.
If you live in two states in a single tax year, you are considered a “part-year” resident for tax purposes. But, “if the taxpayer worked in both states, a tax return generally has to be filed in both states unless one of the states does not impose income tax.”
READ MORE: What Moving In 2020 Means For Your Taxes Now
Keep in mind: There are exceptions to every rule. “The exception here is that if a taxpayer lives in a reciprocity state, they only have to pay taxes to their state of residence, and not both the state that they work in and the residential state,” Anderson says. She adds, “If a taxpayer is now working remotely due to COVID-19 and he or she used to work in another state, 13 states have indicated that taxpayers do not have to adjust their withholdings to show that they are working in-state. The 13 states are: Alabama, Georgia, Illinois, Indiana, Massachusetts, Maryland, Minnesota, Mississippi, Nebraska, New Jersey, Pennsylvania, Rhode Island, and South Carolina.”
Q: Can I deduct my home office expenses? What about the new desk and chair I bought?
A: Sorry, you’re not getting that 3-monitor setup deducted. “As a result of the Tax Cuts and Jobs Act, unreimbursed business expenses for employees cannot be deducted,” Anderson says. Unless you’re self-employed, in which case you can deduct any of the qualified home office expenses. The best way to get your money back for the home office you built this year is to get reimbursed by the company you work for, which means having a conversation with your employer about what the exact process for that may be.
Q: Do I owe 2020 taxes on my government stimulus payment? What about my unemployment checks?
A: Your stimulus payments are free money from the government. Thanks! This means you don’t have to report them as earnings and no, they’re not taxable.
Unemployment payments, on the other hand, are taxable, but only if they came from the federal government. Most states do not tax unemployment whatsoever. Be sure to check on the rules in your state while you’re filing your 2020 taxes.
Q: I own a small business. How do I claim my pandemic loan on the return?
A: “There are two types of loans that are being provided to businesses as a result of COVID 19. The two loans are as follows; Paycheck Protection Loan (PPL) and the Economic Injury Disaster Loan (EIDL). There are two versions of the EIDL (a grant, and an advance),” Armstrong explains. Whether you took out one or both, neither is taxable.
Q: I donated a lot during the pandemic. How do I claim those benefits?
A: “The IRS has temporarily suspended the charitable contribution limits for charitable contributions. Currently, individuals may deduct qualified contributions up to 100% of their AGI. A corporation may deduct qualified contributions of up to 25% of its taxable income,” Armstrong says.
If you’re not one to itemize, the IRS is allowing a new provision that “allows for up to $300 in cash donations to qualifying organizations to be deducted from income. Even if you claim the standard deduction, if you made a cash contribution to a qualifying organization, you can claim up to $300 as an above-the-line deduction,” Armstrong explains.
Q: Will it take longer to get a refund since the first tax filing date has been pushed out by two weeks this year?
A: “Typically, the IRS issues a tax refund within 21 days of accepting a return. (It may take an additional three weeks for the IRS to accept your return if you filed by mail instead of filing electronically.) Although the tax deadline is still April 15 this year, the start of tax season was pushed to February 12 (two weeks later than usual). That could result in tax refunds taking a bit longer to arrive this year,” explains Joshua Zimmelman, Managing Partner at Westwood Tax & Consulting.
In addition to that backup, the IRS is still working on returns from 2019 due to the extra long tax season we faced last year. Long story short, yes, it will likely take longer to see a refund in your account.
Q: What if I still haven’t received my stimulus money?
A: Before you start knocking on the IRS’s door, make sure you actually did qualify for each of the stimulus checks. “If you still haven’t received your $600 stimulus check, but should have, you may be able to claim the money when you file your 2020 taxes. You can claim any missing money through a recovery rebate credit on your tax returns. This also applies to anyone who didn’t receive the first $1,200 check either,” Zimmelman says. With that said, you’re not going to get a separate check with your funds at this point. Any money the government owes you will be applied as a deduction to offset the price of what you owe them after filing.
Q: How do I maximize my taxes this year?
A: “As always, the best way to maximize your tax refund this year is to make sure you’re able to take advantage of every tax credit and deduction for which you are eligible,” Zimmelman says. He warns against being too aggressive on your tax forms, but if all of your deductions are legit, and you can prove it, then you should feel confident making those claims.
Q: How do I ensure I get everything right and get my taxes done by the deadline this year?
A: Yes, this tax year is like no other. With plenty of code changes, stimulus checks, and more moves than you might have imagined, it’s okay to feel a little overwhelmed. If you normally ride solo when doing your taxes, don’t feel ashamed to reach out to a professional to help you get it done this year. If you are unable to do that, take your time, do your research and make sure you’ve checked all of the necessary boxes by April 15.
MORE ON HERMONEY:
- This List Will Save You on Tax Prep This Year
- Tax Filing Tips for Women Who’ve Gone Through Some Stuff
- What To Do If You Can’t Pay Your Tax Bill
JOIN THE HERMONEY FAMILY! Own your money, own your life. Follow us on social to get the latest money news and tips!