Year-end money moves amid the pandemic

In most years, writing a year-end column is a snap, but 2020 is not most years. As a result, I will be writing a few columns with action items to consider.

Think about 2021 taxes: The IRS is not likely to extend tax deadlines again in 2021, so start figuring out where you stand. If you received an economic stimulus check (EIP), it is not taxable. But if you collected unemployment benefits, either through your state or through CARES Act programs, those dollars are taxable.

For those who haven’t withheld — and for everyone else, too — use the IRS’s withholding estimator to see if you have had enough money set aside to pay your tax bill in April. If you are employed, notify your payroll department to increase your withholding through the end of the year. If you are not working or are self-employed, you may want to make an estimated tax payment to reduce or eliminate potential tax penalties.

Calculate remote work tax implications: As of October, more than one in five workers teleworked because of the pandemic, and many have done so outside of their city or state of residence. If you fall into this category, understand that there could be tax benefits — or penalties — for the change in location.

The American Institute of CPAs (AICPA) recommends remote workers compile the number of days worked in any states, cities, counties, municipalities, school districts or other jurisdictions you’ve worked remotely during 2020. Then check your primary state’s rules about other jurisdictions and make the adjustments to tax withholding that are needed. Be careful with the home office deduction: I

know what you are thinking — I worked from home and therefore I can deduct some portion of my mortgage/rent, utilities and insurance. Not so fast! The 2017 Tax Cuts and Jobs Act (TCJA) eliminated the employee business expense deduction through Dec. 31, 2025. However, if you are selfemployed, then the home office deduction is still available. According to the IRS, there are two basic requirements for the taxpayer’s home to qualify as a deduction: There must be exclusive use of a portion of the home for conducting business on a regular basis, and the home must be the taxpayer’s principal place of business.

Evaluate outstanding student loans: The CARES Act provided a lifeline to millions of federal student loan borrowers by suspending loan payments, dropping interest rates to zero percent and halting collections on defaulted loans through September. In August, the timeline was extended until Dec. 31, 2020.

As of this writing, there is no extension to the federal program, which means you should analyze your outstanding loans and prepare to restart your payments in 2021. Federal Student Aid and your servicer will contact you ahead of time to nudge you about this, so make sure your contact information is up to date in your account profile to ensure a smooth transition back to paying down the loans.

If you are lucky enough to have a job and your cash flow allows, get a jump on your loan balances.