Be Prepared For These Pandemic-Related Tax Surprises

• Taxes on unemployment income. If you received unemployment benefits in 2020, you need

to report these benefits on your tax return as taxable income. Check to see if either federal or

state taxes were withheld from unemployment payments you received. If taxes were not

withheld, you may need to write a check to the IRS when you file your tax return.

• Taxes from side jobs. Did you pick up a part-time gig to make ends meet? Payments

received for performing these jobs may not have had your taxes withheld. If this is the case,

you’ll need to pay your taxes directly to the IRS on April 15.

• Unusual profit-and-loss. If you run a business that was hit by the pandemic, you may find

your estimated tax payments were either overpaid or underpaid compared to normal. Now

that 2020 is in the books, run a quick projection to ensure you are not surprised with an

unexpected tax bill when you file your tax return.

• Underpayment penalty. If you did not have proper tax withholdings from your paycheck or

your estimated tax payments weren’t enough, you could be subject to an underpayment

penalty. While it’s too late to avoid a penalty on your 2020 tax return, the solution in the future

is to make high enough estimated tax payments each quarter in 2021 or have the appropriate

amount withheld from your 2021 paychecks.

• A chance to claim missing stimulus payments. (A good surprise!) If any of your stimulus

payments were for less than what you should have received, you can get money for the

difference as a tax credit when you file your 2020 tax return.