When it was my turn, it was well past 9 p.m. He looked over my papers, all my accounting of trying to make a life out of words. “Hmm,” he said, “hmm.” He told me I would owe a tax bill in the low thousands. I almost blacked out. “But,” he said gently, “that just means you’re successful. You’ve made this much from writing.”
My accountant taught me that even in a life of pursuing art, where uncertainty is built in, some care can be taken to make plans, to plan for success, not just wish to succeed, and in planning offer myself some ballast against nothing at all going according to plan. It’s a difficult lesson to learn — the lives of great artists are riddled with instability. But he also reminds me, every April 15, not to block my blessings, not to decide I already know how my artistic career will end, that life can surprise you with good things as well as bad.
Nope. The so-called economic impact payments are not treated as income. In fact, they’re technically an advance on a tax credit, known as the Recovery Rebate Credit. The payments could indirectly affect what you pay in state income taxes in a handful of states, where federal tax is deductible against state taxable income, as our colleague Ann Carrns wrote. Read more.
Mostly. Unemployment insurance is generally subject to federal as well as state income tax, though there are exceptions (Nine states don’t impose their own income taxes, and another six exempt unemployment payments from taxation, according to the Tax Foundation). But you won’t owe so-called payroll taxes, which pay for Social Security and Medicare. The new relief bill will make the first $10,200 of benefits tax-free if your income is less than $150,000. This applies to 2020 only. (If you’ve already filed your taxes, watch for I.R.S. guidance.) Unlike paychecks from an employer, taxes for unemployment aren’t automatically withheld. Recipients must opt in — and even when they do, federal taxes are withheld only at a flat rate of 10 percent of benefits. While the new tax break will provide a cushion, some people could still owe the I.R.S. or certain states money. Read more.
Probably not, unless you’re self-employed, an independent contractor or a gig worker. The tax law overhaul of late 2019 eliminated the home office deduction for employees from 2018 through 2025. “Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home,” the I.R.S. said. Read more.
Self-employed people can take paid caregiving leave if their child’s school is closed or their usual child care provider is unavailable because of the outbreak. This works similarly to the smaller sick leave credit — 67 percent of average daily earnings (for either 2020 or 2019), up to $200 a day. But the caregiving leave can be taken for 50 days. Read more.
Yes. This year, you can deduct up to $300 for charitable contributions, even if you use the standard deduction. Previously, only people who itemized could claim these deductions. Donations must be made in cash (for these purposes, this includes check, credit card or debit card), and can’t include securities, household items or other property. For 2021, the deduction limit will double to $600 for joint filers. Rules for itemizers became more generous as well. The limit on charitable donations has been suspended, so individuals can contribute up to 100 percent of their adjusted gross income, up from 60 percent. But these donations must be made to public charities in cash; the old rules apply to contributions made to donor-advised funds, for example. Both provisions are available through 2021. Read more.
At the end of our first meeting, he said to me, gravely, “You are good at this. You are going to make money as an artist. You need to be ready for it,” and he told me what funds to put money in, which retirement plans to invest in, for the following year. I went back to him a year later, when I was getting married, and he gave me advice for my taxes then. He told me, poignantly, “Don’t get married on Christmas or New Year’s. It will ruin those days for you.”
By then, I had talked to him long enough to know that he had been married and divorced, and that he had seven adult daughters of his own, all trained as accountants — they helped him out during tax season. Sometimes I would call his office after negotiating a contract or finding out about a grant, and I would only get the machine. This was because, he’d explained to me, he took off six months out of the year to travel around West Africa to collect the art that I saw in his office.
The last time I saw him in person was the 2019 tax season. I was five months pregnant, my then-husband had just lost his job, and we were suddenly both living off a research stipend for a fellowship I had. He sat with us and assured us it would be OK. I was stressed about money, stressed about my baby’s future, stressed about how I was going to pay for my looming hospital bills. Talking to him was one of the few times during that turbulent pregnancy when I felt like I was being taken care of by another person, instead of taking care of everyone else — a gift for which I will always be grateful.
Last pandemic’s tax season was pushed back again and again by the catastrophe. I did my taxes in June on the back porch of the house I was living in during quarantine, paying a masked sitter $20 an hour for the privilege of talking to my accountant on the phone without a baby in the background. I realized my relationship with him is the most positive one I’ve ever had with a man over money. As I updated him on my pandemic year — marriage over, job offers gone, quarantining in another state — he only murmured sagely into the phone. He’d seen it all. “But I did what you told me to last year and paid my estimated tax,” I said.
“You listened to me?” he replied, with a fatherly warmth. “Of course,” I said. “None of my clients ever do,” he laughed. And then he said he’d set me up for 2021, because I’d followed his directions. It was one of my proudest moments in the hazy, heady year.
Kaitlyn Greenidge is the author of the forthcoming novel “Libertie” and the features director at Harper’s Bazaar.