By Brian Stone
DEARBORN, Mich. – With widespread unemployment, government stimulus checks and a host of tax changes this year, many residents of Dearborn aren’t sure what’s up and what’s down with their 2020 federal tax returns.
We sat down with Abdullatif Aljahmi, a tax specialist at Equity Accounting & Tax Services at 6271 Schaefer Rd here in Dearborn to discuss many of the top questions readers may have as they get ready to prepare their federal income taxes.
Abdullatif Aljahmi (Photo Credit: Equity Accounting & Tax Services)
YAN: When does filing season start this year?
Aljahmi: February 12 is the start date.
YAN: So, when should people get ready to file?
Aljahmi: At this time, you shouldn’t be worried on immediately filing, since the IRS software is under development. Sending your taxes to the IRS is a very serious matter and should be done with great care and due diligence. We advise to start gathering all of the documents now to make sure nothing is left out. Filing a complete and accurate return will speed up processing of the tax return and ensure no delays in getting refunds.
YAN: What Information is needed to file a Tax Return?
Aljahmi: Giving your tax preparer a clear picture of your finances will help them file your tax return accurately and help them quickly identify ways to save you money. Your tax advisor will probably ask you to be prepared to share important personal information with them. That means having Social Security or Individual Taxpayer Identification Numbers (ITIN) with dates of birth for anyone who’ll be on your tax return. This way, your tax advisor can verify who you are, and the IRS won’t send back a tax return because the numbers don’t match (this happens a lot).
Although things can change from year to year, having a copy of last year’s return can give your tax advisor an idea of what deductions and tax credits you qualify for and save you both time in the process. This year you’ll also want to bring information on your first and second stimulus to do a rebate worksheet to ensure you received the correct amounts. You can get this information from Get My Payment option in the IRS.GOV website.
You’ll also need income statements and tax forms like the W2, Unemployment form 1099-G, Pension 1099-G, Social Security (SSA-1099), 1099-MISC, 1099-NEC, 1099-INT, or 1099-DIV and the W2-G from any gambling/lottery winnings. Receipts for donations paid in cash or in cloths or other forms to the Red Cross or other 501(c3) non for-profit organizations are helpful as well. You’ll want receipts for your rent, home heating, mortgage, property taxes, medical expenses or copays paid out of pocket, miles travelled to and from medical facilities. Lastly, you’ll want receipts of any taxes paid for purchasing a automobile and the registration/plate fees.
YAN: Should people expect to get any documents from unemployment?
Aljahmi: Yes, The Unemployment will send a 1099-G form. It will show the total amount received and the total amounts of taxes taken away from it if you choose for the UIA to hold the taxes on it.
YAN: Do tax filers include this unemployment document 1099-G as part of doing their taxes?
Aljahmi: Yes, it is very important to include it in your taxes, as this amount is considered unearned income. However, it is taxable income that will be added to your total annual household income.
YAN: If someone worked and had lower income because of Covid-19, and they have dependents that they claim, do they still get a big refund like last year? Or, is it less because they worked less in 2020?
Aljahmi: Yes, you still get the big refund because the IRS allowed the amount for refundable credits to be calculated using last years adjusted gross income. Which Is the biggest chunk of the refund total.
YAN: If someone did not get their first or second stimulus payment – or any of their family didn’t get it – what do they do?
Aljahmi: When Filing taxes, the Tax preparer will fill out a Recovery Rebate Credit Worksheet to help you work out if you’re missing a payment and for how much. In most cases the missing stimulus payments will be part of the total refunded amount.
YAN: If someone had a newborn in 2020 does my family qualify for a stimulus payment for the newborn?
Aljhami: Yes, Tax preparer will fill out a Recovery Rebate Credit Worksheet to help you work out if you’re missing a payment. The new CARES act made it possible for the new born to get both first and second or ($500) & ($600) the total of $1,100 will be added to the total federal refunded amount.
YAN: What if I purchased a house in 2020 or I own a home are there any tax benefits?
Aljahmi: Yes, there are a few: Bring your closing package with you. Or, your property tax bill and the 1098 mortgage interest statement. A list of itemized deductions such as property taxes paid at closing, mortgage interest paid, mortgage points paid to the lender can be deducted. Other closing costs such as PMI from the mortgage payments may be something we consider.
If you had any of the following repairs done to improve energy in your home, you may also qualify for a tax credit:
- Energy-efficient exterior windows, doors and skylights
- Roofs (metal and asphalt) and roof products
- Energy-efficient heating and air conditioning systems
- Water heaters (natural gas, propane or oil)
- Biomass stoves
Also, in Michigan there is a homestead credit for paying property taxes and a home heating credit for paying heating.
YAN: A couple is married and lives together in the same house and has four children. Can they file separately to benefit from each parent getting the children/dependents credits?
Aljahmi: No! The family must file married filing joint unless choosing to file married filing separate, in which case they will not get any dependent credits. The IRS is watching very closely for married couples to file separate as single or head of household to gain the benefit. That’s fraud. The same applies if the parents have an adult child and feel they can allow their adult son or daughter to claim his brother or sister to maximize his refunds is considered fraud. The IRS is watching very close to every return for errors.
YAN: Are the stimulus payments taxable?
Aljahmi: They are not. They will not be added to your taxable income or taxed at all. It is free and clear money! Enjoy.