HONOLULU (KHON2) — Tax season starts Friday, Feb. 12. With unemployment and businesses requesting loans, however, the pandemic has made filing 2020 taxes a little more complicated.
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The pandemic is changing the way taxes are done this year. Alan Chu, owner of Diamond Head Tax Group, said people on unemployment are likely to owe this tax season. He recommends that they put some money aside.
“Unemployment, whether it’s (Pandemic Unemployment Assistance) or through the state, it is fully taxable as income.”Alan Chu, Diamond Head Tax Group owner
“Because we didn’t go to work at our regular job, no one is withholding those taxes for us, unless we opted for the state to do that for us. And I know some people have but if you didn’t, just be prepared,” said Chu.
Chu said, those who started their own business during the pandemic could have some additional tax deductions.
“There are quite a bit more deductions that we can account for. Now the important thing for this is proper accounting, making sure that you’re tracking your expenses, and then working with someone to plan,” said Chu.
He said, they may be also able to deduct home office expenses depending on their type of work and if they are self-employed.
“Figure out what your rental expenses are, your computer internet expenses are, and give that to your tax professional,” said Chu.
Throughout the state some businesses were also able to apply for financial aid. Chu said, filing those may be a bit complicated and will need to include a lot more paperwork.
“For those self-employed or business owners that have had, you know, any kind of the COVID funds like (Small Business Administration) funds or the (Payment Protection Program). I would consult with a tax professional or an accountant on how to get those properly taken care of,” said Chu.
Some people took out money from their 401K or IRA to pay for expenses during the pandemic. Taking money out from these accounts is usually taxable. Those who did may not have to pay all the taxes on that money in 2021, however.
“The CARES Act from the previous year allowed people to take portions of their retirement funds like for their 401K’s if they have them, and then actually spread those taxes out over the next three years.”Alan Chu, Diamond Head Tax Group owner
Those that are eligible and have not received the first or second stimulus checks from the U.S. government can also still claim the payment as recovery rebate credit on their tax return.
The Internal Revenue Service (IRS) is recommending everyone file electronically.
“You know we’re all working from home now, right, so same thing with the IRS. A lot of them are working remotely, and so when you mail things into them, there’s a delay in processing,” said Chu. “They’re so backed up they rather have everyone e-file everything so they can process it in a more timely manner.”
Chu also recommends going directly to the State website or the IRS website to make tax payments. The deadline to file for taxes in 2021 is Thursday, April 15. More information can be found on the IRS website.