Pandemic benefits make tax filing more complicated this year, expert says

As if the pandemic hasn't already been physically and mentally taxing, soon we're going to find out just how literally taxing it's going to be. A slew of government-funded benefits may make filing your tax returns even more complicated this year.

"I don't want to scare the taxpayer. They should not panic at all," said certified public accountant Eric Yn of South Pasadena.

But he's quick to add: "It is going to be completely different."

If you received a stimulus check last year, you should not have to pay any taxes on that amount. And if you didn't receive any stimulus money last year because you earned too much in 2019, there is still a chance to collect it if your income took a big enough hit last year.

"If your income drops below the threshold, you can actually claim that credit back on your 2020 taxes," Yn explained.

Unemployment benefits are another big factor for many people, and this is where the tax ramifications start to get more complicated.

"Unemployment is taxed at the federal level. You do not pay taxes to California," said Yn.

But while California generally doles out up to $450 a week in unemployment, for a while Congress added an extra $600 a week, called Pandemic Unemployment Assistance. If you collected PUA, you could be facing a big tax bill even if you chose to have taxes withheld.

"They (the IRS) only base the tax on the $450, which is your regular unemployment, as opposed to the additional $600," Yn said. "So most of the time, they will be under withholding."

Working from home could also make filing more complex. If your place of employment is in California and you decided to work from a home in another state, you may have to pay income taxes in that second state as well.

"For the tax that you paid to the other state, you will get a credit from California. So this will eliminate double taxation," Yn explained.

But it does mean filing a separate tax return for the other state.
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