Recordkeeping & 2020 Tax Time Coming

posted in: CYJ Blog, Lifeskills, Recordkeeping

Are you ready for Tax Time and have all your records in order? How many COVID impact questions have surfaced for you, your family, or your business? Fortunately, you have a little more time to get it all together with the deadline for individuals and self-employed was extended to May 17 by the IRS.

Those questions will surely mount depending on each person’s situation. Be sure to visit the IRS website to know the answers to those questions (https://www.irs.gov/newsroom/fact-sheets). Here are just a few questions I have heard with related links for answers to those questions.

  1. Can I extend tax return submission and federal income tax payments without added penalties and interest?
  2. What is the American Rescue Plan Act of 2021 signed into law March 11, 2021?
  3. How does working from home during the pandemic impact my taxes?
  4. Does my business qualify for employer tax credits for Sick and Family Leave and Employee Retention Credit?
  5. What if I lose my job and have been receiving unemployment compensation?
  6. What if my income declined because I had to close my business?
  7. How does the stimulus payments I received impact my taxes?
  8. Who is eligible to claim the 2020 Recovery Rebate Credit?

The questions keep mounting day by day. The IRS has developed a FAQ page to help us understand how life changes may affect our 2020 tax return. They have cautioned those facing financial difficulties may find there is a tax impact to certain events, such as job loss, debt forgiveness or tapping a retirement fund.

In addition, the information on a taxpayer’s 2020 tax return may look different from your 2019 tax return. You can check the IRS “What Ifs” for Struggling Taxpayers page for some scenarios that may have a tax impact for your family. Some of these impacts are not all negative. The FAQ page explains what taxpayers need to know about filing a complete and accurate tax return, claiming credits and deductions, getting a refund timely and meeting tax responsibilities.

According to HR Block, Top 5 ways coronavirus impacts could affect your taxes (February 19, 2021), there are five top ways coronavirus impacts could affect your taxes you may want to check out.

  1. Claiming unemployment
  2. Taking on multiple jobs
  3. Receiving relief for student loans
  4. Giving to charities
  5. Suspending mortgage payments/experiencing foreclosure

Also, Jean Murray, The Balance Small Business, How COVID-19-Related Laws May Affect Your 2020 Tax Return (March 18, 2021), states “The COVID-19 pandemic has resulted in new laws as well as changes to other laws due to coronavirus-related stimulus efforts. If you took advantage of any of these stimulus programs, they may affect your 2020 individual tax return, business tax return, or both.” One possibility is new coronavirus stimulus laws may even lower your 2020 taxes.

These questions and concerns are just a few of the many issues families will probably face with their 2020 tax returns. So, make sure your records are clear and organized for whoever does your taxes. I suggest you also be prepared with your questions so your tax preparer will be able to answer them. May you find a friendly face to help you navigate this new tax territory we are all entering.