Do You Have Tax Questions About Our Pandemic Year?
This past year has been confusing. Most of us worked from home, and many of us had our incomes change due to the shelter-in-place orders. Restaurants closed, some temporarily and some permanently. Entertainment venues shuttered. Schools switched to remote learning.
But how did these changes affect your tax burden?
Andrew Keshner from MarketWatch.com asked his readers five questions. Keshner asserted that only 5% of adults in the United States were able to answer these questions correctly.
- People do not have to pay taxes if they did not earn any income. True or false?
- If someone worked from home instead of their usual place of employment last year, they can claim their home office as a deduction on their taxes. True or false?
- People do not have to pay taxes on the money they received in their stimulus checks. True or false?
- People do not have to pay taxes on unemployment benefits. True or false?
- Income earned from gig economy jobs (i.e. driving for Doordash) is still taxed. True or false?
The answers, for those keeping score at home:
- Non-earned income is taxable too, and this includes dividends, interested, alimony, and child support.
- The tax break only applies to independent contractors and self-employed individuals, not to employees.
- Stimulus payments do not count as taxable income.
- Unemployment benefits do indeed count as taxable income.
- No matter what your side hustle may be, and even though it shows up as a 1099 rather than a W-2, you still need to pay taxes on this income.
It may be surprising how many adults in the US got these questions wrong. However, financial literacy is not guaranteed in our society, and misunderstandings abound.