Two money smart women are offering Detroiters an inside look into everything needed to file 2020 taxes. COVID-19 has introduced some unique financial circumstances and now, residents are questioning if a year’s worth of help from the state will come back to bite them this tax season.
Shawntinique Wiggins, an accountant and owner of Wiggins and Associates, and Danielle Atkins, a certified tax preparer and partner of Sunny Day Taxes, have a lot in common. Their knowledge on finances is helping Detroiters successfully file their taxes this season.
An unexpected and unprecedented health crisis plagued the country during the 2020 tax year damaging health and the economy, equally. To help, the government launched a series of national programs aimed at providing relief to individuals and business, some taxable and some not. Now, with the tax season looming, an already stressed economy may see some additional tension with the uncertainty of this filing season.
A constant fight in government, stimulus checks have been the center of controversy since the early days of the pandemic. Starting in April 2020, and once more since, stimulus relief funds have been awarded to millions of Americans, untaxed. Now, taxpayers are worried where millions of Americans are going to get the money if required to repay.
“They’re going to get their money back. I feel like they’re going to get their money one way or another,” Wiggins says. “They’re going to boost up something.”
On the opposite end, taxpayers who did not receive one or neither stimulus payment, may apply for the Rebate Recovery credit on their taxes. Individuals who did receive a stimulus relief payment and received less than the full amount can also apply for the credit.
“If you did not receive the stimulus check either time or you received less than what you were eligible for, you will let your tax preparer know how much you received and you would basically recover the difference between what you could have received versus what you got,” Atkins says.
Unemployment benefits went out to a large number of Americans who lost their job due to the pandemic. Often causing crashes to the site, the number of applicants grew steadily with over 57 million Americans seeking financial respite from mounting bills. Opting to have taxes automatically withdrawn from benefits could save taxpayers from having to pay a penalty.
“If you did not have taxes taken out of your unemployment check, you could end up owing this year and/or getting less back,” Atkins says.
An increased number of people performing odd jobs or entrepreneurs starting new businesses have emerged during quarantine. Wanting to make ends meet, employment for food delivery services such as Uber Eats and Door Dash warrant a 1099, or a sub-contractor’s tax form. Keeping a record of business expenses can pay off during filing as some business-related expenses can be written off. Also, paying all necessary sole proprietor taxes will help to keep fees and penalties to a minimum.
“If they are self-employed, pay those quarterly taxes,” Wiggins says.
For families who have welcomed a new life, additional tax benefits may be available. Along with claiming the child, taxpayers who did not receive the child credit for the new baby on the stimulus will be able to apply for the credit with this filing year.
“If you had a baby in 2020 and didn’t receive the stimulus for that child, you can claim that child now for the stimulus,” Wiggins says.
With the help of self-service sites like Turbo Tax, individuals can e-file their own taxes from the comforts of home. However, experts are suggesting working with a financial professional for this year’s tax season because of the changes in rules and complexity of filing caused by COVID.
“I honestly recommend if you can afford it and if you can help it, work with a tax preparer this year because the tax season is weird because of COVID and the pandemic,” Atkins says.
Along with these tips, the gurus advise keeping all documents on hand, ask for additional credits potentially available to help curb amounts owed and reading over all signed information.
The state has begun processing and accepting tax returns as of February 12. Individuals are urged to file early. Tax Day is April 15. Taxpayers filing after the deadline are subject to a monthly penalty topping out at 25 percent. Taxpayers who have a pre-existing balance owed will still be required to pay.