Whether you're filing a little late for 2020 or trying to get ahead in 2021, it's always a good time to study up on tax law!
We love taxes so much in this country that 91 million Americans had to get refunded for paying too much of them! All jokes aside, there is some very important information to know before you file.
There are some very common IRS questions asked every year, and with all the changes in 2020, it's more important than ever to clear them up. Let's talk about a few of them.
Common IRS Questions: Can You Still Get Tax Breaks After December 31st?
Yes! There are still things you can do to get tax breaks for the previous year all the way up to the tax deadline, which was May 17 this year but is usually April 15!
You can contribute up to $6000 to an IRA, or $7000 if you're older than 50, or make a charitable donation, or whatever you want to do to get your tax break!
When Will I Get My Tax Return?
Usually, you'll get your refund sent to you within 21 days if you file electronically, and this is the fastest method. Having it direct deposited will definitely speed up the process. For a paper return, you should expect to wait about 2 months after filing.
The IRS was swamped this year, so reach out to them if you filed more than 2 months ago and still haven't received your refund. You can also check on the IRS website.
I Can't Pay My Back Taxes. What Should I Do?
The first step is to file. No matter what, you need to file your taxes. Failure to file results in a much higher fee than failure to pay. You'll still have a few options for paying it off.
You should call the customer service hotline for the IRS at 1-800-829-1040 and discuss payment options. They will offer you the option to pay in installments until the total is completed, an Offer in Compromise, which allows you to make a smaller offer that the IRS can either accept or reject or if it is determined that you cannot make any payment, they may temporarily suspend collection.
If they suspend collection on your payment, your failure to pay penalties and interest will continue to accrue during the suspension
I Worked From Home During The Pandemic. Can I Take A Home Office Deduction?
Yes, but only if you are self-employed. If you work for a company regularly, but file your taxes as 1099, rather than a W2, then you are considered self-employed and can take this deduction.
The simplified deduction allows you to deduct up to $1500 with the standard price of $5 per square foot, up to 300 square feet.
Should I Take The Standard Deduction?
Around 68% of the country chooses to take the standard deduction every year, but doing this could mean you're taking a smaller refund than you're owed.
For the 2020 tax year, the standard tax deductions were $24,800 for married couples, $12,400 for single people, and $18,650 for heads of households. Choosing to itemize your deductions could easily mean more money in your pocket if the itemized deductions are more than the standard deduction.
I Received Unemployment. Is It Taxable?
If your adjusted gross income was less than $150,000 in 2020, then you can deduct up to $10,200 which currently only applies to the 2020 fiscal year.
In most cases, the federal government taxes unemployment insurance as regular income, but you have the option of having taxes withheld from your unemployment payments while receiving it, so choosing this will avoid that issue in the future.
I Donated To Charity. Can I Take A Deduction?
In most cases, you need to itemize your donations to receive a deduction, but you can still take a standard deduction if you donated to charity. Part of the CARES act was to allow an additional deduction for anybody who donated up to $300 in charitable contributions in 2020.
To qualify, however, the donation must have been made in cash and not through a third party.
What Are Some Tax Breaks That I May Have Overlooked?
Everybody hopes they can find some secret breaks they didn't know about, and you may be in luck!
Did you put money into a retirement account? You can get a tax break for saving for retirement, which is worth up to $1,000 for individuals, and $2,000 for married couples.
Do you have kids? The credit for child and dependent care expenses is worth up to $1,050 per child, and $2,100 for two or more. In order to qualify, you must have children under the age of 13 and be paying for some form of childcare, and the deduction will be based on the cost of the childcare and your income.
What Do I Do If I Missed Some Deductions When I Filed?
The deadline has already past, so if you're reading this in the summer and you see some deductions you missed, you're in luck! You have 3 years to file an Amended Return form if you left something out or realized that you made a mistake.
There are some consequences with this, so make sure you know when to amend your form.
How Can I Protect Myself From An Audit?
Now that we went over some IRS questions and answers, here's the most important advice that the IRS won't tell you. If you get audited for any reason, the best thing you can do is hire a professional tax lawyer to get you the help you need!
Anything Else?
If you're late on filing your taxes, or you're getting ready for next year, then good for you! It's best to stay informed so you can protect yourself later on!
Keep up to date with our latest tax news, and learn what you need to know about 2021 returns!