So much changed in 2020. As you’re preparing to file your taxes, you may feel overwhelmed and have lots of questions. This short guide will give you a bit of a rundown as to what may or may not have changed for filing your taxes in 2021.
You’ll still want to do all the things you regularly do to prepare your taxes around this time of year. Make sure you have all your documents from all of your employers.
Some of these documents might include:
– A W2 from your employer that accounts for your wages, salaries and tips.
– 1099-INT & 1099-OID Forms: Interest Income Statements if you have your money invested anywhere.
– 1099-DIV Dividend Income Statements.
– 1099-B if you got any money from the sale of stock, land, or anything else from Capital Gains.
– Proof of your alimony that you’ve received or paid.
With so many changes in 2020, it’s good that this process stayed mostly the same. But if something changed in 2020, you want to be prepared for that too.
What if you were laid off during this year?
Unfortunately, a lot of people were laid off at the beginning of this year during the pandemic. If you were unemployed for any length of time in 2020, you’ll also receive a form from your state or county’s unemployment office. You will need to claim this unemployment income on your 2020 taxes. If you didn’t have money set aside to pay these taxes, you may have to pay taxes on what you were paid out.
What if you started your own business?
If you own your own business or are a freelancer, you might have to do additional steps on your taxes to make sure that all of your earnings are being correctly reported. If you own a traditional business or are a freelancer, you’ll be asked to report your business income and expenses. This is how much you earned through your business in the year of 2020 and how much you spent on your business.
Can I claim my new work-from-home office as a business expense?
To claim something as a business expense, you must be using that item for work related things. If you bought a printer, mouse and keyboard, or other office supplies that weren’t reimbursed by your employer, it might be worth it to claim those things on your taxes.
It is possible to claim something as a partial expense. For example, if you bought a printer for work purposes but you also use it to print arts and crafts for your kids, you’d want to estimate how much of the time you use it for work and claim that percentage. (ex: 80% work, 20% crafts)
There is more information on the IRS website, but bottom line: if you’re feeling uncertain about it, don’t claim it. It’s not worth the potential audit.
Other Life Changes and Milestones That Could Effect Your Taxes.
There are several other things that can change how you file your taxes this year, such as:
– Student Loan Interest Paid
– Moving Expenses: Did you move?
– Medical Expenses or Medical Insurance Paid: Did you lose or gain insurance through the marketplace this year?
– Educational Expenses: Did you go back to school or finish school?
– Child Care Expenses: Were your kids home the entirety of quarantine and out of daycare?
Lots of things changed in 2020, but your taxes aren’t as complicated this year as you think. File your taxes with confidence and reach out to a tax preparation professional if you need to.