Certified Public Accountants say they are answering several new questions this year from people anxious about how the pandemic and its emergency response affect their process. The tax filing season officially began on February 12, the first day the IRS began accepting tax returns for 2020.
“It will be the most stressful fiscal season yet,” Kesha Jontae, an Atlanta income tax strategist, told NBC News.
A series of laws passed under the CARES Act last March directly impact taxes, from expanding unemployment compensation to exemption from IRA withdrawal fines. Customers are also wondering how to count their stimulus checks and what are the tax implications of their remote work situations. The constantly updated guidance is keeping tax professionals on the alert.
“It is taking a little longer to find out exactly how the new laws that were literally passed about a month ago will affect your tax return,” said Jontae.
It is even changing the way tax professionals serve their clients. At the beginning of the pandemic, CPA Edward Arcara’s office in Buffalo, New York, quickly took social distance measures, such as finding customers in parking lots to deliver documents and conversations. Now that it has been almost a year, they have become a little more sophisticated.
“Although we are still holding the parking lot meetings, we are asking our customers to use our secure deposit box in our halls. We graduated from Zoom and team meetings, but it is still quite new for some people, ”said Arcara. “There is never a dull moment here.”
Here are the questions that CPAs say customers keep asking:
Are stimulus checks taxed?
No. “The payment is not income and taxpayers must not pay tax on it,” said the IRS.
I never received my stimulus check, or was less than I should have been. How do I pay my taxes?
Archivers can claim any missing economic impact payments by requesting a Recovery Discount Credit. This includes additional payments of $ 500 and $ 600 for dependent children under the age of 17.
Do I owe taxes on my unemployment benefits?
Unemployment income is taxable. If you chose not to have taxes withheld, you owe money at the time of tax.
I am now working remotely. Can I deduct the home office?
In most cases, only freelancers can receive a deduction from the home office. If you have a dedicated work space reserved in your home for a “side show”, you can deduct household expenses directly related to that self-employment.
I worked remotely, out of state. Do I have to pay state taxes twice?
It depends. If you have worked remotely in a different state for more than 183 days, or about 6 months, you will probably have to pay taxes in the state you were originally based in and in your remote location. However, if your state has a reciprocal agreement with your home state, you can avoid double taxation. And if you are among those who have moved to Texas or Florida, who have no state taxes, you should not be paying taxes in those states.
Can I deduct business expenses paid for with a Check Protection Program loan?
If the funds were used to pay eligible expenses under the PPP program, such as rent and utilities, they are deductible. The IRS issued a new guidance on January 6, reversing the previous guidance – a relief for small businesses, but a headache for their accountants.
How are early retirement withdrawals affected?
The CARES Act exempted early withdrawal penalties in savings plans such as 401 (k) or IRA for people under 59 and a half. But money still counts as normal revenue. Architects have three years to put the funds back and get a refund of all taxes paid.
The start of the tax season has been delayed for a few weeks, do I have more time to submit the application?
No, it’s still April 15th.
With the season compressed, should we expect delays in the IRS?
The IRS has a slightly lower staff than normal, but says it is ready. The agency strongly encourages e-filing this year, as paper returns may face additional processing delays. For faster refunds, send an email and use direct deposit.
Jo Ling Kent contributed.