Luckily, if you are a little late in filing, the IRS has extended the tax deadline for the 2020 year to May 17, 2021. To get information straight from the source, visit the IRS website. Or, for some of the quick highlights, keep reading.
Taxes on stimulus and unemployment
This is because the government views unemployment benefits as a source of income just like they view income that you earn from your job.
If you have been collecting unemployment then you can expect a tax bill. This is an issue this year because unemployment benefits were extended through much of the year and many received many thousands of dollars in benefits.
Did you withdraw from a retirement account?
Luckily, the CARES Act , signed by former president Donald Trump in March of 2020 allows you to withdraw up to $100,000 without paying this penalty.
That said, even though the early withdrawal fee is being waived, this money is still treated as income and will be taxed. The rules for taxation are slightly different depending on whether you used a 401(k) or an IRA and we’d recommend speaking with a professional to learn more.
Prepping for tax season
All these situations have different tax implications and can complicate filing. To make sure that you are taking advantage of as many write-offs as you can, we would recommend working with a professional. Even if you don’t consider yourself a high-earner, you may fare much better this year by hiring a professional instead of using a free software like TurboTax. Pros know how to claim all the deductions you are entitled to, while trimming the likelihood of an audit.
If you find that you owe more than you can afford, contact the IRS. If you owe more than $10,000, call the Tax Relief Helpline to discuss your options for reductions and payment plans. That number is 888-452-7841.
What if I never received a stimulus check?
Although these should all have been delivered by now, there is always a chance that yours got lost in the shuffle or delivered to an old address.
One option you have if you never received one of the stimulus checks, is to claim a 2020 Recovery Rebate Credit when you file your taxes.
This credit will replace your stimulus check in the form of a tax rebate. This may also apply to you if you were a student during 2019 and your parents claimed you as a dependent, but now you are filing for yourself.