Millions of Americans were working from home last year. Many families converted their guest rooms, dining tables, and back patios into an office or a classroom.
Businesses either thrived beyond their projections or struggled to keep their doors open as daily needs changed for Americans practically overnight.
Of course, with the prior year so full of adjustments, our tax filing will look a little different this year, too.
If you need tax services in the Sweetwater, TX area, West Texas, or New Mexico, Midwest Finance has seen federal tax changes year after year. We can help you file quickly for your maximum tax refund.
When Should I File My Taxes?
The IRS extended the tax deadline to May 17th, but filing sooner is always better if you’re expecting a refund. Link your bank account for direct deposit to see your 2020 tax return faster.
Your tax rate varies based on your income, and stimulus checks are awarded based on the previous year’s income tax return. That means if you were ineligible in 2019, filing your 2020 tax return may make you eligible for stimulus payments.
COVID-19 Changed My Job Status and Income in 2020
If you were one of many Americans who received unemployment benefits in 2020, you should receive a Form 1099-G in the mail with your total compensation and federal income tax withheld amounts. If you requested that your checks did not have federal income tax withheld, you would be required to pay the IRS this spring. State tax laws will vary.
If the pandemic reduced your income, you might be eligible for an Earned Income Tax Credit.
Do I Qualify for the Home Office Deduction?
The home office deduction is for independent contractors and self-employed individuals usually paid with a 1099. If you’re considered an “employee,” you are not eligible for a home office deduction.
However, if you started an online business, freelanced, became a blogger, or took on other work outside of your full-time job that required an office, you may be able to claim a home office deduction.
You can deduct mortgage interest, rent, utilities, insurance, repairs, and home maintenance if you are eligible.
While you may not have as much gas and mileage to deduct this year, if your tax situation meets these requirements, you can count your home office as a deduction:
You are a renter or a homeowner
You are self-employed, an independent contractor, or a business owner
Your home is your primary place of business
You have a designated workspace inside your home for conducting business regularly.
OR
You have an additional workspace on your property, like a detached building, garage, or shed, used exclusively for your business.
If all of the above statements sound like they apply to your business, you can file two different ways for this deduction.
For office spaces 300 feet or less, you can deduct $5 per square foot, up to a $1500 deduction.
With the traditional home office deduction, you calculate your home’s percentage devoted to your business.
I Received COVID Relief Small Business Loan or Stimulus Checks. Is That Taxable Income?
Fortunately, your COVID-19 stimulus checks, PPP Loans, COVID-19 Economic Injury Disaster Loan, and SBA debt relief income are not a tax liability.
I Should’ve Gotten Stimulus Checks, But I Never Received Them.
If you made less than $75,000 annually as an individual or $150,000 as a couple in 2019 or 2020, you should’ve been eligible for the first two COVID relief stimulus checks. If you have children, you may also qualify for more money to cover your dependents.
You can determine how much should’ve been paid out to your family and apply a Recovery Rebate Credit to your 2020 tax return, essentially using your stimulus money as a free tax credit.
How Can I Prepare Now to Get a Refund for 2021?
Talk to a tax professional about your withholding. If you’re overpaying throughout the year, that is a loan to the government you may never see again. If you withhold too little, you’ll owe the IRS every spring. Be sure you’re withholding just enough to cover your taxes and keeping receipts for anything that could be considered a deduction.
Proper withholding is crucial to avoiding penalties and interest from the previous year. You can determine at the time of your tax preparation what your withholding strategy will be for the following year.
With so many changes in 2020, it can be challenging to understand last year’s taxes.
With a tax expert at Midwest Finance, you can feel confident that your taxes were prepared correctly. If you’re in the West Texas or New Mexico regions, please visit one of our 22 convenient tax office locations for your tax preparation.
