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Tax Tips: Expect Changes Due to the Pandemic

There are new tax laws and temporary provisions to be aware of before you file your returns.

Deadlines & Extensions

Tax Day is typically April 15, 2021. However, as of March 17, 2021, the deadline to file federal taxes (Form 1040) has been extended to May 17, 2021. Certain state, local and payroll tax deadlines could also be extended. This is very similar to 2020 and the onset of the COVID-19 pandemic, when the tax deadlines for the 2019 calendar year were delayed to July 15, 2020, to help deal with economic disruptions and changes to tax laws.

Please note that this article has been prepared for informational purposes only. It is not intended to provide (and should not be relied upon for) tax, legal or accounting advice. You should consult your own advisors before engaging in any transaction.

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Tax Changes & Legislative Relief Bills

It is important to be aware of information and changes that arose from the COVID-19 health crisis and the legislative relief bills that were passed as a result, such as:

  • Stimulus checks do not count as taxable income.
  • Those who received unemployment benefits must pay income taxes on that money, if their earnings exceeded $10,200 in 2020. If taxes were not withheld from those benefits or estimated quarterly, they must be paid by May 17, 2021. Please check with your tax advisor about payment deadline changes since they are very fluid. However, if you earned less than $10,200 in unemployment benefits in 2020, you do not have to pay income taxes on that money.
  • If your company asked you to work remotely during the pandemic, you cannot claim the home office deduction (phone, internet expenses, etc.), which is reserved for self-employed individuals only.
  • For 2020 tax returns, the child tax credit is worth up to $2,000 per child under the age of 17. The American Rescue Plan that was recently signed expands the credit for 2021 by including children that are 17 years old and increasing the amount to $3,000 per child ($3,600 per child under age six). The credit for 2021 is fully refundable and families can receive it in period payments. Note that child tax credits are subject to income rules.
  • Medical or travel expenses incurred because of the novel coronavirus are tax deductible if you itemize. Health insurance companies, Medicare or Medicaid should cover your treatment for COVID-19, but that might still leave some patients responsible for deductibles or copayments, which can be deducted from your taxes.
  • As part of the CARES Act, if you donated to a nonprofit organization in 2020 and are taking the standard deduction, you can now claim up to $300 in cash donations. If you choose to itemize your taxes instead, for 2020, you can deduct up to 100 percent (vs. typical 60 percent) of your adjusted gross income in qualified charitable contributions.
  • Those under age 59 ½ were allowed to take up to $100,000 out of their retirement plans, 401(k)s and IRAs for specific coronavirus-related reasons until the end of 2020 without having to pay the additional 10 percent tax, also known as an early withdrawal penalty.

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