Yes, filing taxes can be difficult and tedious, but it’s a kind of necessary evil that also offers a golden lining: Last year’s average tax refund was more than $2,500, and the vast majority of those refunds should be in hand within three weeks of being processed using direct deposit, according to the IRS.
The Internal Revenue Service announced that the nation’s tax season starts Friday when the tax agency will begin accepting and processing the more than 150 million tax returns that are expected to be filed this year.
While the start date has been pushed back a couple of weeks, the deadline to file remains the same: April 15. In 2020, that deadline was extended due to the coronavirus, but there is no indication that will happen this year.
To help walk you through the nuances of filing your taxes amid a pandemic, we turned to Jeremy Chappell, a CPA at the Roseburg firm Wicks Emmett LLP. Chappell began his career at Wicks Emmett in 2011 after graduating with a Bachelor of Arts in accounting from Northwest Christian University and obtaining his CPA. He is now a director at the firm.
Question: How has COVID-19 changed things in terms of filing tax returns? What’s new/different this year?
Answer: 2020 has been a crazy year, and that’s going to transition into the new year when you go to file your taxes. If you are among those who were eligible to get a stimulus check, but it never arrived, there is a way you can claim that amount on your taxes and get it in a separate refund. They are technically credits against your 2020 tax, and what that means, if you didn’t get the rebate, then you may be able to claim it and get an additional refund or reduce the liability on your 2020 federal tax returns. The same for new parents. If you had a child in 2020 and never received the initial $500 payment or the latest $600 check, you will be able to file that as a tax credit on your return and get it back as a separate refund.
Q: Will my stimulus checks be taxed?
A: Those stimulus payments are not taxable income for federal purposes. However, many people have been confused because the Oregon Department of Revenue said they are not directly collecting taxes on stimulus payments. But those payments do affect the calculation of your federal tax liability subtraction, which means the stimulus payments are increasing the amount of Oregon income some people are paying taxes on. You could potentially owe more tax this year to Oregon due to your stimulus checks.
Q: Are unemployment benefits taxable?
A: Yes. If you received unemployment benefits those will be taxed.
Q: What about if I dipped into my retirement account?
A: If you took money out of your 401K to help with Covid related expenses, you will not be penalized for doing so but you will still have to pay taxes on that money, although you can spread the tax over a three-year period, which is nice.
Q: What about charitable donations and other possible deductions?
A: There is a new non-itemized deduction for up to $300 for charitable donations to an approved organization. Teachers will be able to deduct expenses for PPE, such as face masks and hand sanitizer, up to $250. And due to the SECURE Act, there have been several changes to retirement benefits in 2020 and beyond.
Q: What should I know about the Paycheck Protection Program?
A: The Paycheck Protection Program through the SBA is a way for businesses hurting from the pandemic to get a potentially fully forgivable loan to help pay for expenses like payroll, rent, utilities, and other operational expenses. You can apply now for the 2nd round of funding.
Q: How long can I expect to wait for my return? Anything I can do to speed it up?
A: It remains to be seen how quickly the IRS and Oregon Department of Revenue will be able to issue refunds on 2020 tax returns due to Covid, but usually the estimate is three to four weeks from the date you filed for efile returns, and two months for mail-in returns. You can speed up your refund by signing up for direct deposit.