Author: Jonas Gihone Akula
You must submit your taxes before the IRS deadline if you do not want to get any penalty. Your refund will reach you faster when you take care of this aspect. However, it is also vital for you to check the changes in the tax structure and process before filing your taxes. Using a professional tax preparer that has the best name is one of the wisest things to do.
The entire world has been affected because of COVID-19. The world’s economy, especially the US economy, has been adversely affected by this deadly virus. Hence, IRS has implemented some changes to assist people and the economy.
Here are some details of the significant changes that have occurred:
Expanded Unemployment Benefits
Many people have lost jobs in the year 2020 and are living on unemployment benefits. As a result, many people are unsure of how to report employment benefits on the tax return. As per IRS, any compensation that one receives to assist people who do not have employment needs to be on the tax return form. If you are using a tax preparer, check with them before taking things further.
As of August 2020, IRS has released more than 269 billion dollars in stimulus checks. The primary purpose of issuing stimulus checks is to assist the financial condition of millions of people who are gravely affected because of COVID-19.
These payments are also known as EIP or Economic Impact Payments. They are the main focus of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Many people are unsure of whether they should record these payments in their tax returns. IRS has released a statement that people do not have to report these payments as they are not includible in the gross income. Your refund is not going to increase or decrease if you include these payments as taxable income.
10% Withdrawal Penality
Previously, there was a 10% withdrawal penalty when people removed the funds from their retirement account. Fortunately, the IRS did remove this penality so that people can request the release of the funds without the fear of getting a penalty. COVID-19 has placed some people in the worst condition that they have to pull this amount. People can move forward with early withdrawals.
$300 Charitable Contribution Deduction
Yes, this is a new deduction that taxpayers can use if they have made any cash contributions of around $300 to any qualifying charities. Now, individuals can apply this deduction even though they do not itemize it.
Small businesses such as sole proprietorships, self-employed individuals, and independent contractors with less than 500 employees or fewer are eligible for Paycheck Protection Program (PPP). Even though it expired on August 8, 2020, there are chances that they might extend it if a relief bill is signed.
Check these things and file your tax returns before the IRS deadline. It is best to take the help of an experienced tax preparer if in confusion.