Everything about this year since March has just felt a little … off. And I mean aside from all of the cultural and political turmoil we’re living through.
The seasonality of everything feels different too. Pro sports are out of sync, “back to school” season surely doesn’t feel normal (at least for most of my clients), and even something like Labor Day — normally a celebration of the end of summer and a hold-your-breath-here-comes-FALL weekend — felt out of time.
And in my neck of the woods, tax season. My Greater Columbus Ohio business clients have a deadline next week (9/15), and estimated taxes for the third quarter are due on that day as well, and it all feels so rushed.
But things could certainly be worse. I’m grateful that I have a vocation that puts food on our table, and that of my team. For many, this simply isn’t the case.
So, unemployment benefits “to the rescue” this year.
Well, I have some news for you on that front (in case you hadn’t heard), plus more tax-y things today as we talk about LABOR tax issues.
Labor Tax Updates By Chuck Franklin
“Build your own dreams, or someone else will hire you to build theirs.” –Farraj Gray
This will be a bit of a scattershooting article, as there are a variety of things that I want to cover that all can be filed under the heading “labor”.
As we all know, the “labor force” right now has been massively disrupted. And for those of my readers who are in that category, the word “disrupted” is far too tame. Let’s call this for what it was: there was an unprecedented economic tsunami this spring and summer, and we have still to recover from it.
That said, recent data is encouraging. According to last week’s DOL report, there was a 12+% decrease of seasonally-adjusted claims for unemployment compared to the week previous.
But things are still very bad.
How bad? Well, according to that same report, the specific amount for ALL types of unemployment benefit claims (for the week ending August 15) was 29,224,546. Last year, during the comparable week, unemployment claims totaled 1,639,622. That’s about a 17X increase.
So, the big point here is this: if you claimed unemployment benefits, you have very good company — and you will have a tax bill.
That’s because unemployment benefits ARE taxable. And while some states were good about withholding it on the front end, not all of them did so.
Which means that you absolutely need to take this into account (even on an estimated tax payment next week).
The IRS released a (surprisingly helpful!) Q/A document about these benefits here.
TL;DR — If you got benefits, the state and federal agencies will send you a form (1099-G) come tax time.
Even if you get this form — keep track of things yourself. Government agencies occasionally make mistakes. 😉
Pay at least some estimated tax. That will let the IRS know you understand that your unemployment benefits are taxable and that you’re trying to fulfill your tax obligation.
One other labor tax related question I’ve been receiving: “Is my new home-office situation tax deductible?” With many people now working from home, it’s a pretty common question.
Short answer: if you are a wage-earning employee … sadly, NO.
If you are a business owner (or a new side-hustle proprietor) … YES, with qualifications. The home office must be used exclusively for conducting business on a regular basis, and second, the home office space must be for your principal place of business.
There is some leeway on that second qualification and these rules underwent some changes from the TCJA (which seems so long ago), so the IRS put together a flowchart to help us understand.
For all of this (and much more) we’re here to help: http://calendly.com/chuck-franklin
To your family’s lasting financial and emotional peace…
“CRISIS Action Plan” for my Greater Columbus Ohio tax clients and friends:
1) Don’t marinate in other people’s panic. Be mindful of your social media consumption.
2) Continue to stay financially and logistically prepared for worsening situations.
3) Make sure you have some ready, liquid assets, if you are able. (I.e., cash in the bank, and in hand.)
4) Set aside plans for any big spending until the dust settles — but especially look out for your small business owner friends and vendors.