Taxpayers who claim the Earned Income Credit and Additional Child Tax Credit received some good news recently. A special rule in the December stimulus bill lets you continue to claim these valuable credits–even if your income changed in 2020.
What is the lookback adjustment?
Filed on IRS Form 8697, “Interest Computation Under the Look-Back Method for Completed Long-Term Contracts,” the look-back is a hypothetical recalculation of a contractor’s taxable income based on the actual performance of its completed jobs.
How do you calculate lookback period?
An employer’s lookback period is the 12-month time frame ending June 30 of the previous year, which is divided into four quarters. For instance, the lookback period to submit employment tax deposits in 2012 would be the 12-month period ending June 30 of 2011.
What should I ask my tax preparer during tax season?
The coronavirus pandemic has resulted in a host of new tax legislation and potential tax issues and if the preparer you choose works exclusively during tax season as opposed to year round, they may not be aware of how the new laws and the issues could affect you. At a minimum your return preparer should be asking the following six questions:
What kind of questions should I ask my tax pro?
Preparing an accurate tax return always requires a thorough client interview, but that is even more true this filing season. In addition to all of the usual questions tax professionals should be asking questions specifically related to Covid-19 relief provisions.
What should I ask my tax pro about the EIC?
If you are eligible for the EIC your practitioner should be checking to see whether it’s more advantageous for you to use your 2020 earned income or your 2019 earned income for the purposes of this credit as well as for the Child Tax Credit (CTC) if you have a qualifying child.
What should a tax preparer know about home office expenses?
Your preparer also needs to understand when home office expenses are deductible (if you’re self-employed or an independent contractor) and when they are not (you’re a regular employee working from home because of the pandemic).
