Tax Day is just a few days away and after a year of immense change, taxpayers have plenty of questions.
"2020 and 2021 were certainly some of the most complicated tax years I have seen," said Mark Steber, Chief Tax Officer at Jackson Hewitt.
"Life changes, tax law changes, new stimulus payments we’ve not seen before, retroactive law changes passed after the year; there was a lot of moving parts in 2020 and 2021, much of which was very good for taxpayers."
"Three sets of stimulus payments - are those taxable? No," said Steber, who explains that people should not include their stimulus payments in their income. "If you didn’t get all of your money, your tax return is how you will reclaim some of that."
Additionally, about 40 million Americans claimed unemployment benefits in 2020, many of them for the first time.
Unemployment benefits are usually confusing to tax filers, as Steber says many people don’t realize that there is no automatic withholding on the benefits and they are considered taxable income.
"But this year, there was a law change that exempts part of it or perhaps all of it, up to $10,200," he said. "Many people are confused: they think that the $10,200 retroactive exemption means that they’re getting $10,200 in a way of a check from the IRS. The reality is, you only get to take that off of your tax return and have that not taxable."
But that change in taxable income is significant and can put people in a lower income bracket and qualify them for benefits they were unaware of such as earned income credit, child credit, dependent care credit or education credit.