The 2020 tax year will certainly be challenging and unlike anything we have faced thus far. From increased unemployment checks to government relief for businesses, there are many possible tax pitfalls for both individuals and businesses. Surprises are fun in a lot of areas of life, but taxes are certainly not one of those areas. Planning now for possible taxes due to tax withholding throughout this year is vitally important. Fricke & Associates, LLC, wants to help you navigate this unprecedented tax season. Although we have not experienced a pandemic tax season either, we will share all the wisdom and information we find out through our sources.
· If You Received Unemployment Compensation During 2020—Unemployment compensation is considered income by the state and federal government. Unless you requested it be withheld, there have been no income taxes withheld thus far.
· If You Received Greater Compensation Through Your Unemployment Than Your Working Wages—The extra income could boost you into a higher tax bracket, which could be challenging during tax season. Go ahead and begin saving your money now if you have not requested income tax to be withheld throughout the year.
· If Your Business Took Advantage of Deferred Payroll Taxes—The taxes are only deferred through December. Unless changes happen, you will be responsible for paying those taxes in full with your 2020 tax return.
· If Your Business Uses PPP Funds for Things Which Would Have Been Deductible—Your taxes could be higher than usual because you cannot write off those things as deductions if you used PPP funds.
Things to Know:
· Stimulus Checks Will NOT Impact Your Taxable Income or Your Refund.
· If You Were Eligible For Stimulus Funds, But Did Not Receive Them, You May Be Eligible for a Credit on Your 2020 Taxes.
· If Your Business Received PPP Funds and Met the Standards to Become a Grant, the Funds Will Not Be Taxable.
· If You Used Your PPP Funds to Pay For Something Deductible, Such as Rent or Utilities, That Amount Will No Longer Be Deductible.
· If Your Business Received Any Relief From The Government in 2020, Keep All The Paperwork in Case You Are Audited In The Future.
As always, Fricke & Associates, LLC will be standing by to help you navigate this tax season. If you need support for yourself or your business in preparing your 2020 taxes, schedule a visit with Fricke & Associates, LLC!