(CBS News) – With 2020 over, it’s a good time to start planning your finances for the new year. Experts say there are some steps to take now to make sure you don’t get a big tax bill later on.
The pandemic forced millions of Americans to leave the office. In a recent survey from Jackson Hewitt Tax Service, 53 percent of people working in their house said they planned to take a home office tax deduction, but they may not qualify. “Only if you are self-employed or have a home business are you allowed to deduct a home office,” says Mark Steber, Jackson Hewitt’s chief tax information officer. “If you’re just working at home for the convenience of your employer, like I do many days, that is not a home office deduction, but many taxpayers think it is.”
Steber says there is also a lot of confusion over the stimulus checks that were sent out in 2020. They’re “not taxable, you do not have to pay taxes on it,” according to Steber.
But while stimulus checks are not taxable, unemployment benefits are. Experts say people who collected unemployment need to plan now for how that will impact their tax bill this spring.
CBS News business analyst Jill Schlesinger says Americans who worked remotely outside their usual city or state may face a different tax rate. “What you need to do is compile the number of days throughout the year that you worked in your primary location, then the days that you worked elsewhere. So, you compile those days, then you check where your primary residence is, see what the rules are.”
Some workers need to prepare for a smaller paycheck. Payroll taxes that were relaxed for many employees during the pandemic are returning in 2021 which will mean less take home pay.