Tax season could look a lot different this year because of the pandemic.
If you were planning on a nice fat federal tax write off for that home office you set up, you may need to think again.
“If you are an exclusive W-2 or salaried employee and you are working from home, you generally cannot take the home office deduction anymore even though you are working from home,” said IRS spokesperson Raphael Tulino.
The tax reform of 2017 eliminated federal itemized home office deductions for employees.
You are now only eligible to claim these deductions if you are self-employed, a gig-worker, or freelancer and use your home for what the government says is a regular, exclusive basis for your business.
The IRS says small business owners and entrepreneurs can write off expenses whether they rent or own their home.
Expenses such as rent, mortgage interest, utilities, repairs, maintenance and other related expenses can be written off.
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How much you write off depends on the size of the area of your home you use for conducting business.
“All of those things are in fact deductible and there are many CPA’s including myself that would say if you are entitled to it, take the deduction,” said Steve Klein, a certified public accountant.
Klein says unlike the stimulus checks, unemployment benefits are taxable.
According to the IRS, unemployment compensation must be reported on a 2020 federal income tax return.
If you collected unemployment benefits, you have an option to withhold taxes from the payments.
But if you didn’t, Klein says the impact could be a reduced tax refund.
“File early, even if there is some amount of money owed. if it is late, there are penalties and interest and so on,” Klein explained.
If you received unemployment benefits, you should receive what is known as a 1099-G form from the state’s unemployment department.
You will use the information on the form along with any W-2 income to complete your 2020 federal tax return.
