Ask the CPA
Warmest greetings, Sentinel readers. My name is Chris Hughes, a proud Webb City High School grad back home after 30 years in business in the Dallas, Texas, area. I realize accounting in general – and income taxes in particular – are about as exciting as watching paint dry. But taxes are, as they say, a certainty in life. Along with, well, I will leave that for someone else’s column.
I am here to offer up advice, guidance, perhaps an opinion, but mostly answers to any questions you may have about income taxes, keeping the books, the IRS, or how ’bout them Chiefs and Cardinals. If you ask a question, please do not include any personal financial information. We can discuss privately if you wish.
As you have probably heard, the IRS has extended the 2020 tax filing deadline to May 17. I must say, in my entire career, I am certain that I have never felt sorry for the folks at the IRS. Having talked to a few agents recently, I have got to tell you – those people are buried:
Do not get me wrong – no sympathy here from the guy who misses Ronald Reagan. I just want to keep you informed.
Some questions that I get regularly:
Q: Are stimulus payments taxable?
CH: No. In fact, folks who either a) did not receive stimulus payments or b) did not receive the correct amount, will be paid as part of your tax return for 2020. Example: you are single, and you received the first stimulus payment ($1,200), but not the second ($600). When you prepare your taxes, the $600 owed to you will be added to your refund.
Q: I received unemployment benefits last year. Why is my refund much lower than usual?
CH: This is catching a lot of taxpayers by surprise. Generally, unemployment benefits are taxable, just like wages and salaries. If you are receiving unemployment payments currently, you have the option of having taxes withheld from your weekly check. However, the recently passed legislation exempts from tax the first $20,400 for married filing joint returns, and $10,200 for all other taxpayers. If you have already filed your return, the IRS just announced that they will automatically refund money this spring and summer. Stay tuned.
Q: My husband was laid off last summer. We took an early distribution from the retirement plan at his work. Will we have to pay a penalty?
CH: Likely no. Except for some rare circumstances, current IRS guidance includes a COVID exception for early retirement distributions. The short version is: If the reason you took the distribution was COVID related – i.e., the pandemic resulted in lost business which resulted in layoffs, then you do not pay the 10% early withdrawal penalty.
Thanks for reading. If you have questions regarding taxes, accounting, or who the Chiefs should take with their first pick, please submit to firstname.lastname@example.org
Christopher Hughes, CPA