The COVID-19 pandemic affected most things, one of them being your taxes. As the IRS has processed tax returns, people are wondering if the coronavirus impacted their taxes in any way.
Indeed, this tax season is not the same as the previous one. People now need money, especially those who have been struggling during the whole pandemic or those who are unemployed. So, your taxes might be impacted by this situation.
Here is how the pandemic might affect your taxes:
- Unemployment Benefits
If you receive unemployment benefits, you should know that you will pay taxes for them. You will always be taxed for the unemployment benefits on your federal return. The $600 weekly benefit that some people receive under the COVID-19 Relief or Aid will also be subject to taxation.
- Stimulus Check
Last year, the government handed stimulus checks to millions of people in America. There were two checks – one was $1,200, while the other was $600. The good news is that this income is not taxable.
When they file their 2020 tax return, people who were eligible to receive a refund check but did not get one will receive it in a Recovery Rebate Credit form. So, this is a money advance that you would have gotten as part of the refund.
It is important to file your taxes early if you did not receive a stimulus check. This is what is recommended by federal officials. If you do this electronically, you will receive the refunds in a matter of weeks. The same goes for the recovery rebates.
- Home Office Deductions
If you are one of the Americans who were forced to work from home as a result of the pandemic, you may have to deal with home office deduction. However, this only applies when it comes to self-employed people or businesses.
So, people who are employed and work from home cannot claim the deduction. You may try to get this deduction because of the situation, but keep in mind that this will only increase the audit risk.
- PPP Loans
A lot of small businesses started experiencing hardship due to the pandemic. Because of this whole situation, they were at risk of failing. Luckily, they were able to receive a Paycheck Protection Program loan, which helped them survive. If the loans were used for things such as payroll, mortgage payments, utilities, and rent, they would be forgiven.
California and Arizona are two of the states where the taxes have been most affected by COVID-19. In Arizona, one adjustment was made to the state standard deduction amounts that match the federal standard deduction amounts. California also changed the filing deadline to April 15. Besides, both states encourage filing taxes online. But if you still don’t know how your taxes were affected by the pandemic, you should contact a lawyer. There are many tax lawyers in Phoenix or Scottsdale tax attorneys willing to help you. One thing is clear, the pandemic affected everyone in one way or another, and taxes are no exception. If you filed your taxes, you should know why things are a bit different this time. We hoped this article helped you understand the changes made to the taxation system.
Still, the Treasury Department and the IRS made an announcement and said that if someone used the PPP loan to pay for eligible expenses, the amount can later be deducted from the taxable money.
The Bottom Line
California and Arizona are two of the states where the taxes have been most affected by COVID-19. In Arizona, one adjustment was made to the state standard deduction amounts that match the federal standard deduction amounts. California also changed the filing deadline to April 15. Besides, both states encourage filing taxes online. But if you still don’t know how your taxes were affected by the pandemic, you should contact a lawyer. There are many tax lawyers in Phoenix or Scottsdale tax attorneys willing to help you. One thing is clear, the pandemic affected everyone in one way or another, and taxes are no exception. If you filed your taxes, you should know why things are a bit different this time. We hoped this article helped you understand the changes made to the taxation system.