Pocket Change

Editor's Note: This story has been updated to reflect the new extended filing deadline. 

People have experienced a lot of change and financial hardship in the past year. We speak with Steven Wagner, an Akron-based certified public accountant at Wagner & Co., about the circumstances people should be aware of while filing their 2020 taxes for the extended May 17 deadline.

What has changed in taxes this year?

SW: Aside from changes to tax brackets, which are standard, the biggest confusion we’re gonna see is stimulus payment[s].

You’re gonna get a letter from the IRS [Notice 1444-A]. The letter’s gonna say, Here’s what you got. People are going to lose that letter. They need that letter because you have to take that number and put it in your tax returns.

If people don’t have Notice 1444-A when it’s time to file taxes, what happens?

SW: I’m gonna be sending them back to look in their bank accounts or whatever they can to find how much they got from the IRS. They’re gonna be guessing on When did you get it? … They signed the [first] bill in March. Go back and look at your bank statements. … Mail has been slow, so be patient.

If you have a tax preparer, just take that all, put it in a folder, and give it to your preparer — that’s what I need. If you’re caring for it yourself, you will need the same information, so you want it all in one place.

How do you note stimulus checks on taxes?

SW: You go through your tax return, and you calculate your taxes due. Here’s your tax liability. Here’s all your withholdings and your payments against it. Then, a further calculation that’s built-in this year is what your stimulus was supposed to be. Here’s what it was. … It’s gonna reconcile the two numbers. … It’s either a plus, minus or zero. If you got paid too much, you owe. If you didn’t get paid enough, you’re getting more. … [For example,] if you got $2,400 and you were only supposed to get $1,800, you’re gonna owe $600 back.

Most people, it will work, because people’s income doesn’t change that greatly between years. So if they use 2019 and you have to reconcile 2020, your income didn’t change that much. A lot of people — it will change. If you had a good or a bad year, got less money or got too much, it just depends. If your income changed greatly between 2019 and 2020, your stimulus will be affected.

How does unemployment affect taxes?

SW: Unemployment is taxable. You have the option to withhold. … Hopefully, people pay tax out of it. Otherwise, they’re gonna be looking at a bill. ... Do you really wanna stop your withholding and have to pay it all at once come April? I don’t think so.

You’ll get something from the Department of Job and Family Services that says, This is how much we paid you. This is how much we withheld. Once again, it needs to go with all these other documents that show up and be given to your tax preparer or account for it yourself.

Some businesses received loans and grants. How are those accounted for?

SW: It depends on the program it’s under. ... There were quite a few. Some at the state level, some at the local level, some at the federal level.

The big one that made all the news was called the Paycheck Protection Program. … The government gave everybody two and a half months of salaries in cash for the whole company, but the stipulation was you had to keep paying the employees. That one is forgivable if you dot all the I’s and cross all the T’s. You had to continue to pay people. You had to pay all the money out. You can use some of it for rent or insurance or a mortgage, but more than 60 percent had to go toward employees. You couldn’t reduce the number of employees you had. You had to continue paying the same quantity of people. If you followed all the rules, it became a forgivable grant.

People have been sending donations directly to community members rather than through a registered nonprofit. How is that accounted for?

SW: It’s considered a gift. It’s not deductible. … [For nonprofit donations,] I preach to people, All deductions cost more than you make. ... If you’re in the 25 percent tax bracket, that $100 donation, saves $25. So it costs $75. Donate because there’s an intrinsic value for you. Don’t do it because of the tax benefit. I fully encourage people to help, but don’t do it because you’re getting a tax break. Because you really don’t.

Does that include platforms like GoFundMe?

SW: GoFundMes probably are gonna be nondeductible because those are set up for a specific person. Maybe a specific cause set through a charity could be deductible. But be sure. As a tax preparer, I’m not allowed to put anything in that charitable deduction in a return for more than $250, unless you get something from the charity and I see it says thank you [for your donation]. That sheet of paper for charity, $250 or more, is a required document, too. Make sure those are in your file, too.

Can home office supplies be written off for those filing as typical W-2 employees?

SW: All office deductions went away with the [former President Donald] Trump tax changes [for ‘18]. Now, you can work it out — the employer can reimburse the employee for costs. That reimbursement of expenses is nontaxable to the employee, but it’s still deductible to the company. So it’s a way for the employer to give the employees some money for what they’re doing anyway without having any taxability on the employee. But they have to document it. … Reimbursing your employee’s expenses rather than giving a stipend saves both of you money.

Overall, what would you advise people to be conscious of in terms of 2020 taxes?

SW: People can still do an IRA deposit up to April 15. If they have a health savings account, they can still put money away up to April 15. Get your taxes done early, the sooner the better. There are ways to manipulate things even after Dec. 31, but if you bring your taxes April 14, there’s not a whole lot I can do.

Get as much into retirement accounts as you have the financial ability to do so. I preach that. ... We’re not working today so we can work tomorrow. We’re working today so we can relax tomorrow, hopefully.