COVID-19’s impact on 2020 tax returns
SIOUX FALLS, S.D. (Dakota News Now) - During this tax season, tax professionals are being asked several questions pertaining to the pandemic.
The most asked question is if we’ll see a third stimulus check.
“The second most asked question, is the stimulus money, is that taxable? And we’re telling everybody, ‘No, it’s truly free money, you don’t have to report it as taxable income, it’s just yours to keep,” said Jeff Alvey, President of Fair Tax Inc.
Some people were forced to use money from their retirement funds to pay bills and get food after COVID hit.
Normally, this would require some interest in paying back, but if you file your taxes correctly, there is some relief.
“If you took money out a retirement account, an IRA, 401K and if you are under the age of 59 and a half, you don’t have to pay the 10 percent penalty. In addition, you have the ability to defer that tax over 3 years, because you avoid the penalty, but it’s treated as income and you can defer that over 3 years,” said Alvey.
Some people are holding off on filing their 2020 taxes in hopes of a third stimulus check, but tax professionals urge people to get started on their return sooner rather than later.
“We don’t know what will happen throughout the year. We could have another tax season like last year, so the sooner you do get your taxes done the better. I’ve always encouraged that, a soon as you have all of your tax forms, get her done,” said Crystal Carlson, owner of local Liberty Tax in Sioux Falls.
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