Learn 7 Essential Tips for Filing 2020 Tax Returns

     Just as the pandemic changed the ways in which Americans work, COVID has also changed a few things about filing taxes.  Fox5NY offered seven essential tips for successful tax-filing this season.

1. Although tax season usually starts on Jan. 1, this year, the Internal Revenue Service (IRS) will not start processing returns until Feb. 12, so taxpayers should file their tax returns as soon as they can with tax software companies, such as IRS Free File partners, which are already accepting returns.

2. Tax season was delayed until Feb. 12 so that the IRS could adjust to Congress’s Dec. 27 changes to tax law that will provide Americans with more COVID relief.

    "The [Feb. 12] start date will ensure that people get their needed tax refunds quickly, while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible," said IRS Commissioner Chuck Rettig.

3. Instead of submitting taxes on paper, which takes longer to process, taxpayers should e-file: meaning they should file their tax returns electronically and to choose direct deposit to receive refunds.

     "Eight out of 10 taxpayers get their refunds by using direct deposit,” the IRS said. “It is simple, safe and secure."

4. The millions of Americans who had to file for unemployment must include that as gross income and may owe taxes on those checks.

     “If you file early, you can get a payment plan set up if you need one as soon as possible and get that debt off your shoulders,” the IRS said.

5. Some good news: Americans do not have to pay taxes on pandemic stimulus payments, which do not count as “taxable income.”

     "The stimulus payments are considered a tax credit on your tax return, so you won't have to pay any tax on either prior stimulus payments that were made or any additional amount that you'll be able to receive," said the Tax Institute's Garrett Watson.

6. Only self-employed Americans who worked from home in the last year can deduct their work-related expenses. 

    While freelancers, consultants, entrepreneurs, and other independent contractors, can sometimes deduct home office-related expenses, employees who receive regular payroll paychecks cannot deduct any expenses incurred from setting up home offices.                                     

7. Taxpayers can deduct medical expenses, including anything related to COVID, only when they exceed 7.5% of taxpayers’ adjusted gross incomes.

      Therefore, taxpayers are advised to itemize all their deductions, and then go over them carefully with tax preparers and tax software.

Photo by:  Leon Dewiwje