Q+A Interview with: Ariel Jurow Kleiman, Associate Professor of Law at the University of San Diego School of Law

With tax season in full swing, the USD Media Relations team talked with Ariel Jurow Kleiman to learn what has changed during the pandemic for taxpayers and new credits that families can take advantage of this year. 

What are some of the major tax changes we can expect this year, especially with the pandemic? 

If you are eligible for one or both of the stimulus checks that Congress authorized in 2020, and you haven’t yet received it, you can still claim it when you file your tax return. So, if you haven’t yet received your stimulus check, make sure to look for that when you file your tax return.

Under the recently enacted American Rescue Plan, the first $10,200 of unemployment insurance is tax exempt if your income is under $150,000. So, if you received unemployment insurance in 2020, and your income is below that threshold, you should be aware of that exemption when you file your tax return. If you already filed your tax return, the IRS has said that they’ll be able to correct the error without people having to file an amended tax return.

Are there any tax credits that families can take advantage of this year?

The American Rescue Plan expands both the size and scope of the child tax credit for 2021--they made the credit larger and made more families eligible. Now, a taxpayer can claim the child tax credit even if they have no earned income.

Normally families wouldn’t see the expanded benefit until they file their 2021 tax return in 2022. But, in this case, Congress authorized the IRS to send the tax credit to families monthly, starting in summer 2021. This will not affect your 2020 taxes. But as early as July the IRS could start sending advance payments to families with kids. 

Is there one thing you want people to be aware of or to consider before starting their taxes this year?

If you used to work in one state and live in a different state, and now you work remotely, you might be subject to tax in both states. These tax situations can get complicated. When preparing your tax return, make sure to check both your state of employment as well as the state where you physically lived, to see if you might owe taxes in both places. 

Also, some states tax unemployment insurance, although California does not. Taxpayers should check whether their unemployment insurance income is taxable in the state where they live. 

California recently enacted the Golden State Stimulus program, which will provide benefits to taxpayers who qualify for the CalEITC (California State Earned Income Tax Credit). The program also includes undocumented workers, as long as they have an individual tax ID number (ITIN). So if you don't have a social security number, you should apply for an ITIN right away in order to claim this state benefit. For some people, the benefit could be as high as $1,200. 

 What resources can people take advantage of if they can't afford to pay for their tax liability? 

If you’re worried about being able to pay the taxes that you think you’re going to owe, most importantly, do not try to avoid the issue. It’s always better to file a tax return and to work with the IRS on repayment. If you file your return and you can’t pay, there are a few options. For one, the IRS and the state tax agencies have installment payment plans. They will allow you to make smaller monthly payments based on your income until the tax liability is fully paid off. 

If your income is low enough, the IRS may allow you to temporarily stop paying a tax debt. If you owe taxes to the IRS and are facing a severe financial hardship, you may want to call the IRS and ask them to put you into a temporary nonpayment status. They will ask for proof of your financial situation. Once your income returns, they will expect you to continue paying. But, it’s important to remember that interest and sometimes penalties for nonpayment will be accruing during this time.

Finally, if your situation is a bit more complicated or the IRS is asking for more than you can pay every month, you can contact your local Taxpayer Advocate Service or Low-Income Taxpayer Clinic

Ariel was interviewed on FOX 5 San Diego about preparing your tax return this year: https://www.youtube.com/watch?v=zyJJcqaQHJQ

Contact:

Elena Gomez
elenagomez@sandiego.edu
(619) 260-2739