The year 2020 has left a lot of people with no financial stability because of the COVID-19 outbreak. Some lost their jobs, others had to use up their savings, and many struggled to pay for basic living needs.
These hardships will be reflected in the 2020 tax season. There are some things you should remember when filing this upcoming year. Continue reading to find out how to prepare.
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Stay Honest
It’s possible that during the pandemic, you lost your full-time job but picked up a side hustle to help pay the bills. When filing your taxes for 2020, you might think about not including this extra income.
Maybe you felt like giving more to those who need it, such as donating to Goodwill or a local food bank. This is a generous gesture, which you can add as a deductible, but be sure not to exaggerate just how much you gave.
You might feel desperate with your financial situation, and you need any relief you could get. However, cheating on your tax returns can cause problems in the future. Learn how to do income tax audit to understand how much you’ll owe this year and start saving now.
Remember the Credits You Can Use
If you’re not an accountant, there’s a lot to know about filing taxes correctly. There are many credits and deductibles you can use that you might not know about.
The Child Tax Credit allows you to get a $2,000 credit per child. Recently, the income limit increased to $200,000 individually and $400,000 jointly.
This money can help pay for school supplies, food, or extracurricular activities. It can really help you if you lost your job in 2020 because of COVID-19 but still need to provide for your child.
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Stimulus Packages
The government gave out a $1,200 one-time stimulus package to help Americans and boost the economy. This relief allowed so many people to pay off debts, cover their bills, and put food on the table.
This stimulus package is not taxable income and shouldn’t be added to your 2020 report. You won’t have to repay this money. Remember this when filing to save some money you owe.
Along with the stimulus check, small businesses received the Paycheck Protection Program. This gave funds up to 8 weeks of payroll with benefits. It also included amounts for things like utilities, rent, or mortgages.
It was designed to help reopen businesses, which significantly suffered from closing. Although companies will have to pay this back, it’s excluded from the business’s total income for federal tax purposes. This is important to know when filing in 2020.
The Bottom Line
The coronavirus pandemic has not only been a huge medical issue, with thousands of people dying, it’s also a financial issue. This will influence the 2020 tax season greatly.
When filling out your taxes this year, you should keep a few things in mind. Remember to stay honest, use the tax credits allowed for relief, and know that the stimulus packages given are not taxable income.
