5 Things To Know Before Filing Your 2020 Taxes

There are some big changes this tax season that could make the experience a little less painful and might even put a little more cash in your pocket.

Video Transcript

PAT HARVEY: Now, tax season isn't usually something that we look forward to, but this year, there are some big changes that could make it a little less painful and add a little more cash to your pocket. CBS 2's Suzanne Marques has the five things you should know going into tax season.

SUZANNA MARQUES: 2020 was an incredibly tough year for most of us. But as we know, nothing can stop tax season from coming. But returns will look very different this year, with several new breaks and laws that can have a huge impact on your wallet.

NATHAN RIGNEY: The tax return is just the biggest financial event for most people.

SUZANNA MARQUES: Nathan Rigney is a principal tax research analyst for H&R Block. He says that the tax changes will affect nearly all of us. And these are the five biggest shifts you need to know about.

NATHAN RIGNEY: If you received unemployment benefits in 2020, that income is taxable. You'll generally receive a 1099-G from your state agency reporting all of the unemployment benefits that you receive during the year. Now, you may have elected to have some taxes withheld from those unemployment benefits. If you did, great. If you didn't, your refund may come down a little bit.

So I think that stimulus payment, we get a lot of questions, is it taxable? What if I didn't receive all of my stimulus payment? And so the first answer there is your stimulus payment is not taxable. However, if you didn't receive all that you were entitled to, maybe you had a child during the year, maybe you didn't receive your payment for one reason or another, you can claim the excess payment that you're entitled to as a refund on your tax return.

So this year, millions of people are working from home. And so first question is, I have a lot of expenses. Can I deduct those on my tax return? And on your federal return, the answer is no.

California, however, does allow you to deduct those expenses on your state return. If you're self-employed, it's different. You can deduct those expenses on your federal return and your state return.

Those side gigs, that's self-employment income. And so for a lot of people who are doing this for the first time, they're going to discover that it's a lot more complicated to file your taxes than it is with just a W-2. So if you haven't been making quarterly estimated payments, when you go to file your tax return, you discover that you have a pretty big balance due in some situations.

We now know that the expenses that you pay with the PPP loan proceeds are deductible. The other question we get around the PPP is when it's forgiven, is it taxable? No, it's not taxable.

SUZANNA MARQUES: In addition to those tips, Nathan says if you have kids, you need to look into the additional child tax credit, which might be able to reduce your tax bill. And unfortunately there are no tax benefits for home schooling.

The refunds and allowances are out there. Make sure you get what you deserve.

NATHAN RIGNEY: This year, in particular, it's very important to get in, make sure that you claim all the benefits that you're entitled to, and make sure that you're benefiting from that as well.

SUZANNA MARQUES: Tax returns can be confusing, especially with the new rules. So if you have questions, it's important to get professional help. Also, file early. Get your information in with the IRS so if there is another round of stimulus payments, you'll get that money earlier.

PAT HARVEY: And that was Suzanne Marques reporting. And like she said, experts strongly recommend you file early. Get the money you're owed to hopefully ease some of that financial burden.