How 2020 tax season might be different this year because of the pandemic

The IRS has delayed accepting returns for the 2020 tax season until February 12th, with the deadline expected to remain April 15th.

Many have questions on how their return will be impacted when it comes to unemployment, working from home, and stimulus payments. Below are a few categories we are able to answer for you:

Unemployment

“A lot of people in 2020 were unemployed for part or most of the year in some cases and they were receiving unemployment benefits, many of them for the first time,” said certified public accountant Sabby Jonathan with Jonathan & Associates. All the unemployment is considered taxable income. “Others received the additional $600 or $300 per week. All of that is considered taxable income,” added Jonathan.

Stimulus

These payments are not taxed. “They are essentially tax credits, they’re not subject to income tax,” said Jonathan. When you're filing your taxes, “If you didn’t get the full amount that you were entitled to, you can claim the remainder on your tax return. There’s a section where you do the calculation,” added Jonathan. Therefore, any amount that is owed to you, you will get as part of your tax return.

Charitable Deductions

For 2020, two things are changing in relation to charitable donations. “If you itemize deductions, 100% of your charitable donations are deductible up to your adjusted gross income,” said Jonathan. In the past they were limited to 30-50% depending on what kind of deduction. If you don't itemize and take the standard deduction, you can still get a charitable donation up to $300.

Retirement Distribution

Many people needed to tap into their retirement plans in 2020. The penalty from these plans was waved for the year. “Those that dip into their retirement plan and are under the age of 59 ½ good news you’re able to do that without penalties. Still subject to income tax but not the penalties,” said Jonathan. You will also get three years to put the money back in your retirement plan and get a refund of the taxes you paid on the 2020 distribution.

Those also working past the age of 70 ½ qualify to make contributions to their IRA. Previously, this was not allowed.

Home Office

This is one thing many have questions on and is NOT changing for the 2020 tax year. Even with many working from home, home office deductions are only available for people who were self employed during the year and not employees working from home.

Independent Contractors

Some people who picked up side gigs like Uber/Lyft drivers or food delivery service workers will need to pay taxes on their income. “If they didn’t get a form 1099 reporting their income they should reach out to the person that paid them and make sure that something didn’t get lost in the mail,” said Jonathan. The copy of that 1099 form will go to the IRS. If people do not report that income on their tax return, Jonathan said there will be an inquiry from the IRS.

“When you are absolutely certain that you have all the information that is to be reported on your tax return, both income and deduction wise, that’s the time to file your return,” said Jonathan. Last year there was a three month extension to file a return or pay your taxes. At this time, the deadline remains April 15th.

Another thing to remember, as of 2019 deductions are limited up to $10,000.

News Channel 3's Taban Sharifi will have more details tonight all new at 6 p.m. on what you should know as you file your taxes and what major differences you should look out for due to the pandemic.