Even in a normal year, preparing a tax return isn’t much fun. The pandemic is going to take that misery up a notch, and many filers will find their 2020 return is more complicated.
Usually, the Internal Revenue Service starts accepting returns at the end of January, but the date was pushed to Feb. 12 because of the COVID-19 relief package that went into effect in December.
Other factors will also complicate returns this year.
For example, millions of Americans got unemployment checks when the economy tanked. Unemployment income is taxable and many people may not have withheld those taxes. “I’m afraid that people are going to owe and they’re not going to have the money to pay,” said Karen Chiuve, a CPA at Chiuve & Company in Danvers.
Stimulus checks and debit cards were also new streams of income in 2020.
“The good news about stimulus checks is that if you got one, it shouldn’t affect your tax return,” said Norman Richter, a Babson College professor. “The stimulus doesn’t count as taxable income.”
The government allowed emergency withdrawals from retirement funds for pandemic-related expenses, but Richter says this comes with a cost. “The amounts you withdrew early might be spared the penalty — the 10% penalty for early withdrawal — but they won’t be spared the tax on the income that you will now have to pay up on your tax return.”
Working from home has some people wondering whether their home office can be deducted. Chiuve says the tax code is very clear that is not an option. “If you’re an employee and you collect a W-2 at the end of the year from your employer, you cannot deduct the home office. The only people that can claim a home office decision are self-employed people or independent contractors.”
Chiuve tells her clients to file electronically and to request direct deposit to expedite the whole process. “I would definitely try and start the process as soon as possible. If you have a refund, it’s always better to get your return done early. If you’re done before March 15th, you usually get it quicker if you’re looking for that refund.
Wait times for the IRS hotline are expected to be very long. Chiuve says not to call on Monday or Tuesday and to try calling when the lines first open up in the morning.
Cox Media Group