Filing taxes in the time of COVID-19 means navigating new relief bills and tax code changes so you can get the right deductions for yourself and your family. To give Americans more time to adjust to policies like the American Rescue Plan Act and its $10,200 exemption for unemployment in 2020, the IRS has extended the deadline to file this year from April 15 to May 17.
If you still cannot file in time, getting an extension to October 15 is simple, but you have to request the extension by May 17 to qualify. Also, if you were a victim of the storms this year in Alabama, Kentucky, Louisiana, Oklahoma, or Texas, you may qualify for a further extension, depending on your state.
With new policies like the American Rescue Plan Act, the IRS has extended the deadline to file this year from April 15 to May 17.
May 17 is also the last day you can make IRA contributions to count for 2020. It is usually smart to maximize these contributions, as putting money in an IRA is often tax-deductible. The caps for contributions are $6,000 or $7,000 for those over 50 in 2020. As long as you can contribute by May 17, you can get the benefits on your 2020 return.
Finally, be sure to check the deadline of your state tax return. While most states sync their deadline with the federal due date, a few of them have different dates to file. Check with your state tax agency to find out your state’s deadline.
Taxes for the Self-Employed
Independent contractors pay a self-employment tax as well as income tax. These workers file as Self-Employed for IRS purposes, requiring them to pay quarterly taxes as well. This tax bill includes income tax as well as a Self-Employment (SE) tax, which covers the Social Security and Medicare taxes that would be automatically withheld by most employers.
Many of the business expenses for independent contractors are tax-deductible, including the costs of technology, phone calls, supplies, and travel, if they were related to work. You can deduct the cost of maintaining a home office if you used part of your house exclusively for your business on a regular basis in 2020. You can either deduct $5 for every square foot of your house that makes up your home office (up to $1,500) or add up portions of your rent, utilities, mortgage interest, property taxes, and homeowners insurance and take a standard deduction based on that amount.
You can deduct the cost of maintaining a home office if you used part of your house exclusively for your business on a regular basis in 2020.
If all goes well, you could be getting a refund in as little as three weeks. In the past, over 90% of refunds come from the IRS in fewer than 21 days from the time of filing. If you want to speed up this timeline, choose a direct deposit refund, as paper returns and checks are slower to process. Taxes can be a headache even in normal years. Getting them done as soon as possible means they stop looming over your shoulder, and you can get on with your year with a little peace of mind.
FFS Agents – share this post with your networks using our resources in the ABO.
