The millions of people who were unemployed this year may want to start planning now for tax season. Unemployment income is taxable.
If you didn’t already choose to have those taxes taken out, a CPA tells us there are other options.
You could get ahead of it and make an estimated tax payment for the fourth quarter.
The drop in income may also mean you’re eligible for other deductions and credits, like the earned income tax credit or the child and dependent care credit.
“That’s an income-based one that’s based on a sliding scale, depending on how much you make. So, if you made less money, you could see more of that,” said Lisa Greene-Lewis, CPA and tax expert at TurboTax.
Questions on stimulus payments will also be part of your tax return. That money is not taxable.
If you got too much, you do not have to pay it back. But if you didn’t get the amount that you’re eligible for, you can get it as a recovery tax rebate.
While working from home, some people stayed in other states. That could potentially put you on the hook for two state tax returns, depending on how long you stayed there.
Because of the 2017 tax law, deductions for working from home will mostly only apply to those who are self-employed.
Self-employed workers could also be eligible for new credits. You can claim them when you file or estimate those credits and keep them in your pocket now.
“If you were sick or you took care of someone that was sick or took care of a family member, there’s a qualified sick and family leave credit, and they can be worth thousands of dollars,” said Greene-Lewis.
The IRS hasn’t said when the tax filing season will open, but it’s usually in early January.