BLACKSBURG, Va. (WFXR) — Tax season officially starts Friday, and filing this year has certainly come with a list of questions.
The biggest question comes from stimulus checks.
Will they be taxed?
“The very short answer is no. No taxes will be owed on it,” said Derek Klock with Virginia Tech’s Department of Finance. “Essentially, it’s a tax credit. And so, tax credits are not considered taxable income.”
Stock market gains, however, are taxable income, and this year saw many first-time traders during the pandemic.
“If those gains are held for one year or less, that is going to be taxed for your marginal tax bracket, so 10, 12, 20, to 35%,” Klock said. “If you had ownership for one year and a day or longer, then they are taxed in the better capital gains rates, in which case it could be zero to 15% or possibly higher.”
Working from home has come with its tax challenges.
Employees of companies who worked from home this year and took on expenses that aren’t reimbursed by the company cannot file those expenses as tax-deductible.
Klock says filing taxes this year will depend on both complexity and filers’ confidence that they will get everything right.
“There are a lot of platforms available,” Klock said. “If your taxes are fairly basic, you’re not talking about investment gains or small business or trying to itemize your deduction, or things like that, the IRS does have a free file tax prep on their website.”
It might also be worth looking into having someone else file for you this year.
“You know, fees for professionals aren’t too terribly bad, and it does make sure that you get your taxes filed correctly.”
Filing taxes correctly is, of course, important.
Klock points out that penalties for incorrectly filing taxes could range from added fees from the IRS to criminal charges.