Answering your tax questions
Although 2019 tax returns were due on July 15, many of you have followed up with a myriad of tax questions. Here are some of the most common ones.
Should I be concerned that I haven’t received my tax refund yet?
I was inundated with this question in the spring, when the answer was a little easier to understand. If you filed electronically, sit tight — the money is on its way. But if you filed with a paper return, get ready to wait for a long time, as the IRS was operating with minimal staff and there were simply not enough hands available to process paper returns.
Yet, this question has persisted through the summer, after much of the IRS staff finally returned to work, which is terribly frustrating. The agency itself notes, “There is no secret way to find out when a refund will be issued.” The IRS continues to warn that those who filed paper returns would face processing and refund delays. The best and easiest way to check on a refund is the “Where’s My Refund?” tool on IRS.gov. If you filed a paper return and are due a refund, the IRS is actually paying interest on those refunds, which you may receive as a separate payment from the refund.
I have been getting emails about stimulus payments. Are they legit?
No, these are likely “phishing” expeditions — fake messages with links to websites, which seek to steal your personal information. When the IRS announced its annual “Dirty Dozen” list of tax scams earlier this summer, there was a special emphasis on aggressive and evolving schemes related to coronavirus tax relief, including Economic Impact Payments. As usual, the scammers actively play on the fear and unknown of the virus and the stimulus payments. Remember, the IRS will never initiate contact with you via email about a tax bill, refund or Economic Impact Payments. Do not click on any links claiming to be from the IRS.
Can I deduct work-from-home expenses?
In the COVID-19 era, millions of people are working from home. Does that mean you can now deduct some of the cost of your mortgage or rent? What about internet and utility fees? The IRS does allow qualifying taxpayers to deduct certain home expenses on their tax return. What qualifies you? Unfortunately, if you are an employee, you are not eligible to claim the home office deduction. If you are selfemployed, you can potentially deduct certain expenses, like mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent. The IRS notes, “Even then, the deductible amount of these types of expenses may be limited.”
I negotiated a lower debt pay-off for a credit card. Do I need to do something for tax purposes?
In general, if you are able to pay less than you owe, the amount that is forgiven is considered “canceled” and is usually taxable to you, which means you would have to report it on your tax return for the year the cancellation occurs. In this case, the creditor will likely send you a Form 1099-C, Cancellation of Debt showing the amount of cancellation of debt and the date of cancellation, among other things. However, there are a lot of exclusions to this rule, like bankruptcy (debts discharged through bankruptcy are not considered taxable income), so be sure to check with the IRS.