Autumn is not just for pumpkin spiced everything, but also a perfect time to review your tax withholdings and tax payments for the year to avoid any surprises when filing next year.
With a few adjustments in your estimated tax payments and/or withholdings you can avoid surprise tax bills. Here are a few things you may consider that will affect your 2020 taxes before you make any adjustments:
Life Changes Such As Marriage
As a married couple you are now required to file a joint return. Filing a joint return usually turns out to be beneficial for a married couple. However, if you and your spouse are both working, it might put you into a higher tax bracket and would require you to make changes to your tax withholdings.
Working in the Gig Economy
Do you make any money working in the Gig economy? To name a few: drive a car for booked rides, run errands, sell goods online, rent out property or part of it. You must consider any income earned from the gig economy even if it is from part time, temporary or side work not reported on an informational return form like 1099 miscellaneous, W2 or other income statement.
Disasters Such As Wildfires and Hurricanes
If you have suffered any loss attributable to a federally declared disaster, you can be eligible to claim a casualty loss. You may want to consider the impact of this loss on your income and thereby on your taxes before paying your estimated taxes for the last quarter of 2020.
With the COVID-19 pandemic a lot of people lost their jobs. It can be frustrating and stressful. The last thing you want to think about, is taxes. But if you received severance pay and/or payment for accumulated sick time or vacation time, it might result in a high tax bill.
If you filed for unemployment benefits and received unemployment compensation, remember, it is taxable. You can either have tax withheld from the benefits or choose not to and make enough estimated tax payments.
COVID-19 Deferral of Employment Tax
There is some relief available for 2020, due to the COVID-19 pandemic. The CARES Act allows deferrals of some of the payroll tax payments. These are available to both employers and to self-employed individuals, including partners in a partnership. Click here to see more information about the employment tax deferral options.
If you need help navigating all these changes, give us a call.
This material is for informational purposes only. It does not constitute tax, legal or accounting advice.