Local financial professional offering last-minute tax tips
The pressure is on for those who still have yet to file their taxes.
LINCOLN, Neb. (KLKN) — The pressure is on for those who still have yet to file their taxes. The new tax filing deadline is coming up on Monday, May 17.
Financial professional Tim Kulhanek from Stonebridge Insurance and Wealth Management has some tips for last-minute filers.
Can you file after the May 17 deadline?
- You can file after the new tax deadline if you file an extension, that will give you until October 15. Even if you file for an extension, you can still get hit with a late payment fee if you owe money on your taxes and don’t pay by May 17.
- If you miss this deadline and don’t file for an extension, there are two penalties the IRS charges fees for: a late filing fee and a late payment fee.
Should you send your tax return in the mail or file electronically?
- In most cases, filing electronically is the quickest way to get your money, and if you sign up for direct deposit, you may get your refund even sooner.
- If your 2020 income was under $72,000, you can file your return for free using the IRS Free File program.
What do you need to know about taxes and COVID-19 stimulus checks?
- If you received a stimulus check, the money is considered tax-free income and it does not get reported anywhere on your 2020 tax return.
- If you are due a stimulus check or got a smaller one than you should have, you can claim it in the form of a “Recovery Rebate Credit” on your 2020 tax return.
- If you owe Uncle Sam money, your stimulus check could be lower to offset the cost of what you owe the government.
- If you earn more than the maximum income this year and you received a check, you will not be asked to pay back the difference when filing your taxes.
How do unemployment benefits affect our taxes?
- The American Rescue Plan exempts up to $10,200 of 2020 unemployment benefits from income taxes. This applies to households making less than $150,000.
- If you have already filed your return, the IRS says you do not need to file an amended return to receive the tax breaks.
- The IRS will start issuing tax refunds in May for those who filed without claiming the new break on unemployment benefits. Don’t expect that refund to come quickly. While the IRS will start issuing refunds next month, they will continue to do so through July.
Are there any work from home deductions you can take advantage of?
- Most likely, no. A recent tax law change means most workers can no longer claim a deduction for unreimbursed employee expenses.
- There is a tax deduction for at-home workers, but it only applies to self-employed workers who use their office space exclusively for business purposes, not personal ones.
- Employees should also keep track of where they are working and for how many days. You could have to pay tax withholding and non-resident income tax if you are telecommuting from a different state than the one you live in.
- Be sure to check with a tax professional about the laws that may apply to your situation specifically.
Are there any other last minute deductions you can take?
- There is still time to lower your tax bill by increasing your retirement savings.
- Contributing to your traditional IRA or 401(k) reduces your taxable income for the year. You can contribute to your IRA until May 17 of this year for your 2020 taxes.
- Younger workers are capped at saving $6,000 in their IRAs for 2020. However, workers 50 and older can put $7,000 into an IRA.
- You may even qualify for the Saver’s Credit depending on your income. Talk with a tax professional to see if you are eligible.