Massage & Bodywork

MARCH | APRIL 2021

Issue link: https://www.massageandbodyworkdigital.com/i/1338685

Contents of this Issue

Navigation

Page 67 of 100

money will not reduce your refund or increase the amount you owe when you file your 2020 return, and it "will not affect your income for purposes of determining eligibility for federal government assistance or benefit programs." 2 WHAT IF I DIDN'T RECEIVE ANY STIMULUS MONEY? If you didn't receive stimulus money and you're eligible, you can claim the Recovery Rebate Credit on your 2020 Form 1040 or 1040-SR. These forms can also be used by people who are not normally required to file tax returns but are eligible for the credit. The Recovery Rebate Credit was authorized by the CARES Act. Generally, this credit will increase the amount of your refund or decrease the amount of the tax you owe. 3 It's 2021, and the last thing you want to do right now is revisit 2020. Unfortunately, you won't be able to completely erase 2020 from your mind until after you file your taxes. Not only was 2020 a difficult year for your health, family life, and profession, but as a small business owner, "solopreneur," or employee, you will also most likely encounter changes to your 2020 tax bill as a result of COVID-19. As a business owner, you may have applied for—and received—a Paycheck Protection Program (PPP) loan and/or an Employee Retention Credit. As an employee, you may have been laid off and collected unemployment. Or, you may be a freelancer, contractor, or someone who is self-employed and applied for unemployment for the first time. Many of us also received stimulus money, and some of us may have dipped into retirement savings in order to bridge the income gap. So, what does all this mean for you? Let's find out! Keep in mind, the information in this article was current as of December 30, 2020. Since COVID-19 relief efforts are fluid, please check with IRS.gov for up-to-the-minute information. This is not intended as tax advice. WILL MY STIMULUS MONEY BE TAXED? No. Uncle Sam does not consider the $1,200 for each adult and $500 for each child you may have received in spring 2020 taxable income. Instead, the Internal Revenue Service (IRS) considers this money a refundable tax credit, which "is not includible in your gross income." 1 Therefore, you will not include the Economic Impact Payment (as the IRS calls it) as taxable income on your federal income tax return, and you will not pay income tax on it. Also, your stimulus Gig Economy Income What is a gig economy? According to the IRS, a gig economy (also referred to as a sharing or access economy) is activity in which people earn income providing on-demand work, services, or goods—often through a digital platform (app or website), like: • Driving a car for booked rides or deliveries • Renting out property or part of it • Running errands or completing tasks • Selling goods online • Renting equipment • Providing creative or professional services • Providing other temporary, on-demand, or freelance work Note: This list does not include all types of gig work. Is gig economy income taxable? Yes. Just as with other freelance or side-hustle work, the IRS says you must report income earned from gig work on your tax return, even if the income is: • Part-time, temporary, or side work • Not reported on a return form (1099-K, 1099-MISC, W-2, or other income statements) • Paid in any form, including cash, property, goods, or virtual currency For more information, visit irs.gov/businesses/gig-economy-tax-center. By Lisa Bakewell I COLLECTED UNEMPLOYMENT DUE TO COVID. WILL THAT MONEY BE TAXED? Yes. Any unemployment income received is considered taxable income. This includes unemployment income collected from the Pandemic Unemployment Assistance program, which offered unemployment compensation to freelancers, contractors, and the self-employed for the first time. According to the IRS, any unemployment compensation is taxable and must be reported on your federal income tax return, which includes any "special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act." 4 L i s te n to T h e A B M P Po d c a s t a t a b m p.co m /p o d c a s t s o r w h e reve r yo u a cce s s yo u r favo r i te p o d c a s t s 65 SAHAND HOSEINIUNSPL ASH

Articles in this issue

Links on this page

Archives of this issue

view archives of Massage & Bodywork - MARCH | APRIL 2021