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Child tax credits. Stimulus checks. Emergency disaster loan relief. The pandemic had many Americans seeing financial terms and receiving financial benefits that some had never even heard of before. It’s no wonder that an H&R Block survey found that, following the height of the pandemic, 90 percent of Americans are open to seeking professional help when filing their taxes. Most Americans know that feeling of getting help just when they needed it in the pandemic – when they weren’t sure how they’d buy groceries or make a mortgage payment – and first thinking, “Phew” but then wondering, “How will this impact my taxes?”

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A survey by YouGov done with Forbes found that 50 percent of American taxpayers expect their refund to be smaller this year. If you’re ready to file your taxes, you might have a lot of questions that were never relevant before the pandemic. It can be confusing and stressful. We consulted Belinda Ndu, founder of Tax Lady LLC and GAP TAX SOLUTIONS, to get answers to the questions on taxpayers’ minds.

 

Q: How will stimulus payments be handled in taxes?

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A: Stimulus payments are not considered earned income. Stimulus payments received are required to be reported on your taxes. If stimulus payments owed to you were not received during off-season distribution, they can be claimed during filing and paid out with your income tax refund…Stimulus payments are not considered taxable income.

 

Q: If any loans, such as mortgages or student loans, were deferred in congruence with pandemic/emergency relief programs offered, will that impact taxes?

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A: Any student loans that were in an administrative forbearance due to pandemic-related programs will discontinue the first week in May of 2022. So setting up payments and staying current will be important to prevent a defaulted student loan from impacting your tax refund….Mortgages that have been deferred due to the pandemic do not impact your taxes. However, due to the fact that most programs can only be extended for a period of 18 months max HUD (The United States Department of Housing and Urban Development) has a program to help with forbearance repayment assistance.

 

Q: What about business owners who took out PPP loans — what should they know about filing taxes this year? 

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A: The PPP was a part of a COVID relief paycheck protection plan. Any income received under this program is not considered taxable income. However, the IRS is requesting that if the income was received, that it is mentioned in the notes section of the Tax return by your tax professional.

 

Q: Also, with regard to business owners, what about those who received grants?

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A: Business grants are typically considered taxable income. There will always be a few exceptions to this rule so be sure to refer back to your grant source to see if your grant qualifies for an exemption…Any money received from the grant that is not used for expenses would be considered taxable unless it has been considered exempt by the grant source.

 

Q: Unemployment claims skyrocketed. What should someone who took out unemployment know about when filing taxes?

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A: The income received from unemployment benefits is not considered earned income but is considered taxable income. Since it is not considered earned income, in most cases, it will not be used in income calculations to qualify you to receive earned income credits for dependents claimed on a tax return.

 

Q: For many, income is unpredictable right now — especially contractors/freelancers. That could mean drawing up those 2022 estimates could be trickier than previous years. What should they know about that?

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A: To get a more accurate estimate with all of the changes this year, it’s best to wait for all documentation to come in to allow for a more accurate assessment of your taxes.

 

Q: Anything else American taxpayers should know?

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A: Any taxpayer unsure of the amount of payments received for the above-mentioned credits can do 1 of 2 things. 1.) Wait for the IRS to mail you out a letter stating the amount of stimulus or ACTC received.2.)Go to IRS.GOV to create an account and you will gain online access to the information immediately.[Look for form 7202]

Family First credit allows business owners to receive a refundable credit for sick and family leave due to COVID-19. This credit will provide up to $511 per day paid sick leave…$200 per day for family leave.

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