Questions and Solutions with AU Accounting Professor Gives Tax Ideas for the Submitting Season | information

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  Questions and Answers with AU Accounting Professor Offers Tax Tips for the Filing Season |  news

Kimberly Key, Professor at Auburn University, provides information on tax preparation, tax laws and the effects of COVID-19 stimulus tests. She is a PWC Professor of Accounting at Auburn University’s Harbert College of Business.

Question: How could tax preparation be different this year? Should we expect an influx of people using online services instead of traditional stationary methods?

Answer: Professional tax preparation companies have had ample time to plan and prepare for a filing season in a COVID environment. Most preparers are ready to get their job done and serve their clients in several ways: in person with masks, in an office or virtually. Taxpayers can call an office or search online for details of specific preparers. Several Auburn University accounting students are volunteering at SaveFirst, an Alabama organization dedicated to providing free tax preparation for low-income residents. Your filing season will only be virtual.

Question: Are there any changes to the tax code this year compared to the previous year? Should Individuals Expect COVID-Related Income Tax Reliefs?

Answer: The tax rules for 2020 are almost the same as for 2019, but a temporary change for 2020 and 2021 will affect people who want to help others. Donations to qualified charitable organizations are deductible even if the taxpayer / donor makes the standard deduction instead of the individual deduction. The maximum deduction for 2020 is $ 300. For 2021 donations, unmarried taxpayers can deduct up to $ 300, and married joint taxpayers can deduct up to $ 600. The IRS estimates that 87% of taxpayers avail of the standard withholding, so this tax rule may affect many people.

Question: Are COVID-19 Economic Funds taxed?

Answer: The short answer is no. These funds are technically federal tax credits, and there is no mechanism to somehow turn around and make the funds taxable.

The state level is a little more interesting, with the short answer also no. Alabama is one of the few states where a taxpayer’s tax liability can be deducted. Logically, a taxpayer whose federal tax liability is lower than a federal tax credit should have a lower equivalent state tax deduction. However, it is almost impossible to get people to understand this logic. Therefore, the governor issued an executive order to ensure that the stimulus funds do not affect the state tax deduction. In early February, the legislature tabled a bill to ensure that the regulation is valid.

Question: Can many people who work from home due to COVID use this situation to their tax advantage and write off home-related expenses such as electricity and water or expenses such as a desk and new computer equipment?

Answer: No for employees. These costs may have been deductible in the past, but as of 2018 this rule has been removed. However, self-employed taxpayers can still deduct the cost of a qualified home office. If the working environment of a self-employed person changed over the course of 2020, it is worth researching the rules.

Question: Should people expect the refund to be less or more than in the past?

Answer: It depends. If a taxpayer’s situation for 2020 is largely the same as it is for 2019, a refund should be roughly the same. All significant life events such as marriage or the birth of a child or a change in income or expenditure, such as B. a mortgage on a new home can change a taxpayer’s taxable income and refund (or the amount due to the IRS and the state). Some individuals who have not received incentive payments may find that they have lower taxable income in 2020 compared to 2019. In that case, they may be pleasantly surprised to see the incentives when they file their 2020 tax returns.

Question: Should we expect different tax legislation in a new administration in Washington either this year or in the future, and if so, what can we expect?

Answer: We have to wait and see. President Biden campaigned for a platform to raise taxes. Congress is obviously an important part of any change in tax law, so there will be a political process to make changes. COVID-related issues are likely to dominate for the next several months, so it’s hard to predict when taxes might get on the radar in Washington, DC