Tax FAQ for Tax Year 2020

Q: When are my taxes due?

A: May 17, 2021 is the due date for individual tax returns – Form 1040 – and making 2020 income tax payments.

But there are other due dates you may need to know too:

April 15: 1st estimated tax payment for 2021

April 15: income tax return for C corporations

Q: Is my stimulus payment taxable?

A: NO! Your stimulus payments (officially called Economic Impact Payments, or EIPs) are not taxable.

Q: Why did my tax preparer/tax software ask how much I got for stimulus payments?

A: Even though the EIPs aren’t taxable, they may still affect your tax return. If you did not receive the full amount due to you, you will get a Recovery Rebate Credit. That’s a refundable tax credit equal to the amount you didn’t get yet.

Q. Is my unemployment compensation taxable?

A. Yes. But for 2020, the federal government is excluding the first $10,200 of unemployment. That means you’ll only pay taxes part of your unemployment, as long as your total 2020 income was $150,000 or less. The $10,200 deduction will go on your Schedule 1, line8.

Also, some states are excluding at least a portion of unemployment from taxable income, so check your state’s tax website.

Q. What if I already filed my taxes and paid tax on my unemployment?

A. If the $10,200 deduction wouldn’t change anything else on your tax return, you don’t need to do anything. The IRS will automatically recalculate your tax bill and send you a refund.

If it will change other things on your return, you can file an amended tax return once you original tax return has been accepted AND processed. That lets you make any changes necessary to correct the return you already filed so you can get your money back. For federal, use Form 1040X. You can find the form you need for your amended state tax return on your state website.

Q: If I took money out of my retirement, do I have to pay tax on it?

A: Yes… but the rules are different for 2020. If you took an early distribution from your retirement account in 2020 for Covid-related reasons:

  • You don’t have to pay any early withdrawal penalties
  • You can spread the tax bill out over three years: 2020, 2021, and 2022
  • You can pay the money back, as long as you do it within 3 years

Q: Can I file as single if I got separated in 2020?

A: No, but you do have some options. The general rule: If you’re married on 12/31/2020, you’re married for tax purposes. That gives you the option of filing as either married separate or married joint.

But is an exception: You may be able to file as Head of Household (HoH). Those rules here depend on where you live, how long you and your ex have been living apart, and whether you have any kids. You may be able to file as HoH as long as:

  • You’ve lived apart – meaning separate addresses, not separate rooms – from your ex since at least July 1, 2020
  • You have a qualifying child who lives with you
  • You paid at least 50% of the cost of maintaining that separate household

Q: Do I have to pay tax on my PPP loan?

A: No… and maybe. For federal income tax purposes, PPP loan proceeds and forgiveness don’t affect your taxes. BUT some states are imposing income taxes on PPP loan forgiveness. Check in with your state’s tax authority to find out their treatment.

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