Tax Issues That May Impact Your 2020 Return
The year 2020 has been full of many unforeseen circumstances and challenging aspects. With the end of the year around the corner, it’s important to know what you should be looking ahead to in terms of taxes. It’s no secret that 2020 returns will be somewhat of a difficult and different task to take on. Knowing what to look for is key. The following is a list of tax issues that can affect your 2020 returns, due April 2021.
Teleworking: Whatever income you earn, you pay taxes on, as well as the state you live in and the state you work in. Because of the spread of COVID, many businesses sent employees home to work to slow the spread. These workers may end up paying taxes to two jurisdictions. This could occur if you’ve moved your residence, even temporarily, but your income is still derived from work done for a company located elsewhere.
Relaying to your employer to withhold taxes for the appropriate states, will help prevent an unexpected tax bill. Know that by working even one day in another state, could result in taxation.
Payroll tax: As businesses try to regain their footing in the early months of 2021, many employees could see a pay cut as the economy tries to restabilize from the coronavirus-related tax break signed August 8.
Employers were given the option to temporarily stop withholding the payroll tax on their employees starting in the month of September. The deferral will continue until the end of the year. The 6.2 percent of the employee’s income that is taxed goes toward Social Security, which pays for retirement, survivor and disability benefits. This deferral only affects employees who earn up to $4,000 every two weeks and less than $104,000 annually.
Home office deduction: Unfortunately, working from your couch or bed does not allow a take home office deduction. Even if an employer requires remote work due to COVID, employees cannot claim the home office deduction. The Tax Cuts and Jobs Act passed in 2017 eliminated employee business expenses on Schedule A. However, independent contractors and self-employed can still take a home office deduction.
The coming 2020 tax season will bring on much confusion. But we are here to help.
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