What You Need to Know About the Coronavirus and Your Taxes

Wondering how the coronavirus pandemic will change the way you file your taxes? You’re not alone. The COVID-19 pandemic changed everything about the year 2020, and it’s made the tax filing process a bit more complicated. Here’s what you need to know about the coronavirus and your taxes before you file in Round Rock, TX.

How do stimulus checks affect my 2020 taxes?

Millions of Americans received a $1,200 stimulus check after passage of the CARES Act in 2020. If you received a stimulus, this is just the first way the coronavirus affects your taxes. The good news here is that the stimulus check won’t count as taxable income, instead being treated as a refundable tax credit. You can look at it as an advance payment of money you would have received in your 2021 tax refund.

How does the Paycheck Protection Program affect my 2020 taxes?

If you own a small business, you may have received assistance in the form of a Paycheck Protection Program (PPP) loan. These loans can be forgiven if you used them for the following business expenses:

  • Payroll
  • Rent
  • Interest on mortgage payments
  • Utilities

When you pay for eligible expenses with money from PPP loans, you can deduct it from your taxable income. An experienced tax professional can help you determine if you are eligible, and if you’ve had your loan forgiveness application approved by the Small Business Administration.

How do unemployment benefits affect my 2020 taxes?

Anyone who filed for unemployment will notice a big difference in how the coronavirus affects their tax filing in Round Rock, TX. The American Rescue Plan (ARP) made the first $10,200 of unemployment benefits tax free. If your benefits exceeded that amount, you’ll need to report the excess as taxable income. Also, if your household income is over $150,000, all of your unemployment benefits must be reported.

How do retirement plans affect my 2020 taxes?

The coronavirus pandemic also impacted the way retirement accounts are taxed for 2020. The changes affecting retirement accounts can be quite complex, and it’s best to speak with your tax or financial professional. Your age is the biggest factor here, and it determines how much you’ll be able to withdraw from a retirement account without a penalty, as well as the required minimum distributions you need to take. Remember that you shouldn’t panic if you made money on a 401(k) or traditional IRA and you’re facing a huge tax bill for 2020. You can get a refund on any taxes you paid on that money with up to three years to return the money to your accounts.

Things always get a little stressful when it’s time to file taxes, but this year presents some unique challenges. If you’re filing in Round Rock, TX, it’s important to be aware of how the coronavirus affects your taxes. It’s best to get the help of a professional to make sure you’re paying the right amount, or that you’re receiving the refund you deserve. Contact Anderson, Perrin & Rastogi Tax Services, LLC today to learn more about how these special changes affect your 2020 return.