An already taxing time will be even more complex this year, as the financial fallout of the coronavirus pandemic lands on nearly every bottom line one way or the other.
"It was definitely an interesting, chaotic year," said Kevin Rose, a CPA and partner with the Chattanooga accounting firm of Market Street Partners, PLLC.
For many individuals, two rounds of stimulus payments of varying amounts depending on income hit their bank accounts in 2020, with more expected in 2021. Tax time is an opportunity to double back and make sure that stimulus amount reflects any changes taxpayers experienced in 2020 - from the birth of a child to a change in income, Rose said.
"If the stimulus payment was lighter than it should have been, the way to true it up is that 2020 tax return," Rose said.
The stimulus payments aren't taxable income, though unemployment payments are, which may come as a surprise to some taxpayers, said Julie Sforza-Smith, program manager at The Tax Institute at H&R Block.
"A record number of Americans have been out of work, and understanding the impact of that income can be really scary because there are so many people on unemployment who have never been on unemployment before," she said.
(Read more: Volunteers offering free income tax help for some at Chattanooga area sites.)
The IRS will begin processing returns on Feb. 12, and expects more than 150 million returns to be filed this year, with the vast majority before the April 15 deadline.
Pandemic tax time is particularly complicated this year for small business owners, many of whom took advantage of forgivable federal Paycheck Protection Program loans to help them weather the economic downturn, Rose said.
(Read more: Chattanooga small businesses pursue second wave of Paycheck Protection Program aid.)
Initial guidance was that the loans were not taxable income, but there was a catch: business owners initially could not deduct business expenses paid for with the loans, he said.
"There's nothing like some of the meetings we had with clients letting them know the PPP funds were indirectly taxable," Rose said.
Tax-time resources
The Urban League of Greater Chattanooga and its community partners are offering the Volunteer Income Tax Assistance (VITA) program at a dozen area sites to provide free tax assistance for whose incomes were less than $58,000 last year, or to seniors, people with disabilities, United Way members or those with limited English speaking skills. A list of filing locations and times is available at ulchatt.net/vita-tax-resources or by calling 423-756-1762, 311 or 211.Through IRS Free File, taxpayers whose adjusted gross income was $72,000 or less can choose from online tax preparation products in English and Spanish. The products are available at IRS.gov/freefile.
The IRS reversed that guidance in December and will allow those expenses to be deducted, he added.
Further complicating matters, tax deadlines were moving targets throughout 2020, which meant a tax season that essentially never ended, Rose said.
As the pandemic took hold in March, the IRS moved the filing deadline to July 15. In April, tornadoes tore through the region, and the IRS extended the filing deadline to Oct. 15 in affected counties, including Hamilton and Bradley.
"Normally, people catch their breath a couple of weeks after April 15, but it was year-round, basically," Rose said.
The pandemic is also changing the game when it comes to how tax preparers interact with their clients, said Sforza-Smith of H&R Block.
Safety protocols in the firm's 18 area offices include after-hours appointments, deep cleaning offices, frequently disinfecting high-touch areas, social distancing, Plexiglas dividers, and drop-off services. And virtual options make it easy to avoid offices altogether, she added.
"You can send in pictures of documents, you can drop them off, for DIY filers, if you get stuck we have unlimited chat, we have video chat, we can share screens - all of that is available," Sforza-Smith said.
Contact Mary Fortune at mfortune@timesfreepress.com. Follow her on Twitter at @maryfortune.