W9s and other forms are arriving in mailboxes as tens of millions of American taxpayers prepare to hand over a percent of hard-earned money to the government – or to receive a refund.
Federal stimulus payments and working from home are a few of the concerns and questions in an already complicated American taxation process. Burrillville’s Suzanne R. Miranda, MBA, owner of a tax preparation business that bears her name, says “Hundreds of people are calling about these questions.”
“With so much change created by the pandemic, we are already receiving a lot of questions from customers – uncertainty is high. And, at a time when too many people are struggling financially, the stakes couldn’t be higher for getting taxes done early and correctly this year,” said Jeff Jones, H&R Block president and CEO.
People are confused about what’s taxable, and what they can claim or deduct. But the annual ritual of gathering returns, filling out forms, and delivering the sealed envelope to the post office, or uploading forms online to make the IRS April 15 deadline remains normal.
The economic devastation of the COVID-19 lockdowns brought new bewildering developments for many taxpayers.
To untangle the taxation web of rules, Albert Turcotte, Jr. EA, MST says, “People should probably have it done professionally,” A tax professional for 40 years, Turcotte says “things are ever changing.”
And often confusing.
Kevin Cordeiro of H& R Block in Slatersville, says “a good million people or more,” didn’t get a stimulus check. But these Americans can get a “recovery rebate”; in other words a recovery to their tax refund equal to the amount of the stimulus check.
The shut downs have brought another change to the tax code. The IRS has waived the penalties on qualifying taxpayers under the age of 59 who took a distribution from their 401k during 2020.
Millions of Americans who received unemployment compensation in 2020, many of them for the first time, have to report it as income.
Home schoolers and students attending school virtually from home do not qualify for a tax break, nor do the number of people finding themselves working from home because of the virus.
On the other hand, tax deductions for businesses with a designated area set aside at home for an office still qualify for certain deductions.
Miranda says parents might qualify for stimulus checks for babies born between Jan. 1, 2020 and Dec. 31, 2020.
Parents could receive up to $1,100 in stimulus money provided the parents meet income guidelines. and did not receive a stimulus check for the child earlier in 2020.
The $1,100 figure breaks down as follows: the first stimulus last spring gave families $500 per eligible child, while the second stimulus package allows qualified families to receive $600 per eligible child.
Parents also with income less than $56,844 last year may be eligible for the Earned Income Tax Credit, which provides as much as $6,660 for a family with children provided they meet the qualifications.
As usual, the IRS reminds taxpayers to “to keep all necessary records, such as W-2s, 1099s, receipts, canceled checks and other documents that support an item of income, or a deduction or credit, appearing on their tax return,” as stated on its website.
The IRS also cautions that unemployment compensation is taxable – and must be included as gross income on tax returns.
Taxpayers can begin filing their federal and state returns on Friday, February 12.