Connect with us


Top 6 tax-related questions you have in 2021



Top 6 tax related questions you have in 2021

As you plan your 2020 returns for the April 15 tax filing deadline, you’re probably considering how changes in your lifestyle in the midst of the pandemic play a role in what you file with the IRS.

If you moved out of your apartment to work from home at your parents’ place in an alternate state, which state annual income tax do you pay?

Also, would you be able to deduct that new ergonomic office chair from your taxes since you got it to work remotely?

What might be said about the stimulus check you received— is that viewed as taxable income?

Confused taxpayers, don’t worry. You positively are in good company. Indeed, popular expert-on-demand site JustAnswer expects to get more than 100,000 tax-related questions between January to April 15.

Ahead, somebody speaks to tax expert Angela Anderson, an affirmed public accountant, and certified financial planner, who gives a few answers.

  1. What if you moved to another state during the pandemic?

You may need to pay income tax in different states if you had a change in view during the pandemic. However, not generally — this question truly reduces to whether you became (or planned to become) an occupant in the state you moved to (by changing your driver’s license, mailing address, car registration, and so on)

There are three distinctive residency statutes for tax purposes: resident (full year), part-year resident, and non-resident.

Generally, when a taxpayer resides in two states during the tax year, regardless of how long, the taxpayer is referred to as a part-year resident for tax purposes, Anderson clarifies.

Being a resident, or even a part-time resident, usually requires having ties in the state, similar to a driver’s license or voter registration. Leasing an Airbnb in Denver a few months while working remotely wouldn’t qualify you to be viewed as a resident of the state of Colorado.

There are a few exceptions:

These 13 states have said taxpayers don’t need to change their withholdings to show that they are working remotely in-state because of Covid: Alabama, Georgia, Illinois, Indiana, Massachusetts, Maryland, Minnesota, Mississippi, Nebraska, New Jersey, Pennsylvania, Rhode Island, and South Carolina.

Nine states don’t impose income tax on personal income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

A few states are called reciprocity states, which means you just need to pay taxes to your state of residence and not both the state you work in and your residential state.

  1. Can you deduct your home office expenses? What about the new desk and chair you bought?

If you are a W-2 employee (instead of an independent contractor), the appropriate response is no. This is a result of the 2017 Tax Cuts and Jobs Act (TCJA) that made unreimbursed employee business expenses for representatives ineligible to be deducted.

On the off chance that an individual is self-employed, nonetheless, they can still deduct qualified home office-related costs and any furniture bought for business use, Anderson clarifies.

  1. Do you owe taxes on your government stimulus payment? Shouldn’t something be said about your unemployment checks?

You don’t owe taxes on any stimulus checks got in 2020. Notwithstanding, unemployment compensation is, in all honesty, thought about taxable income at the government level and in many states.

“Stimulus payments were paid to qualifying individuals to help reduce the financial burden of Covid-19 on individuals and their families,” Anderson says. You along these lines don’t need to report both of the $1,200 or $600 payments when you file.

Unemployment income gets provided details regarding Form 1099-G, the same form that state tax refunds are reported on.

  1. Will it take more time to get a refund this year?

The IRS is, no uncertainty, extremely busy. However, it should take a similar amount of time as common to get a refund. This time span is for generally less than 21 days (from the time the return is accepted) on the off chance that you file electronically and set up direct deposit.

“From my experience, the average timeframe to receive a directly deposited refund has been two to three weeks for federal and one to two weeks for the state,” Anderson says.

Anderson doesn’t suggest filing a paper return, which can back things off. Paper checks may require as long as about a month and a half to show up via the mail upon filing.

Also, there are different glitches: “Filing a paper return is not advisable because the return could get lost in the mail or end up under a pile of papers on someone’s desk at the IRS,” Anderson adds.

  1. You own a small business: How do you claim your pandemic loan on the return?

A year ago, there were two types of loans offer out to businesses as pandemic relief: Paycheck Protection Program (PPP advance) and the Economic Injury Disaster Loan (EIDL), the latter of which incorporated a grant and an advance.

Neither the PPP loans nor the EIDL is taxable income.

  1. What are tax suggestions if you started day trading in 2020?

This depends on the off chance that you incurred substantial capital gains or losses.

On the off chance that you caused losses, you won’t need to pay capital gains tax. “In addition, you will be able to deduct up to $3,000 ($1,500 if single) per year of the loss amount until the loss amount has been exhausted,” Anderson says.

Capital increases are taxed in two ways: 1) either short-term (held for a year or less) or 2) long-term (held longer than a year). “Long-term capital gains receive more favorable tax treatment,” Anderson says, giving the below clarification.

For example, if an individual sells an asset and it is viewed as a short-term asset (owned for a year or less), any addition caused will be taxed at the ordinary income tax rate. With an ordinary income tax rate of 24%, that short-term capital increase will be taxed at 24% also.

Then again, if an asset was held for more than a year, the capital gain will be taxed at the long-term capital gains rate, which is either 15% or 20%, contingent on that individual’s total taxable income for the year.

Regardless of whether you brought about a gain or a loss and you get a Form 1099-B or a Consolidated 1099-B, you should file the Schedule D (Form 1040) and Form 8949.

follow us on google news banner black


Recent Posts


error: Content is protected !!