Tax Wrinkles for Work-from-Home Employees During COVID-19

Tax Wrinkles for Work-from-Home Employees During COVID-19

January 26, 2021

Over the last year, Americans have endured almost impossible circumstances due to the outbreak of the novel coronavirus, COVID-19. Millions of workers have adapted to a new life working from home. While the arrangement has its benefits (endless sweatpants!), it’s also got its frustrations (also endless sweatpants).

What a lot of employees may not realize is that there are certain tax implications when you’re full-time WFH in Hayward, CA. Here’s what you need to know.

The COVID-19 difference

In 2019, the majority of the American workforce spent their days commuting to an office. They spent eight to 10 hours there, five days a week, before heading home. Due to the shelter-in-place regulations enforced in many states last March, the normal work routine changed in 2020.

People who could work from home were obligated to do so. That meant more time at home (obviously), which led to increased utility bills, monthly food costs, internet-related expenses and more. That’s to say nothing of the bills incurred setting up a home office where none existed before.

Freelancers win in the end

When it comes down to it, there is little refuge for regular employees who WFH in San Leandro, CA. Guidelines implemented by the Tax Cuts and Jobs Act strictly prohibit work-from-home employees from taking deductions for a home office.

However, those people who freelance, or who transitioned into freelance work during 2020, can take deductions for setting up a home office and the space their home office occupies in their home. Freelancers can even discount a certain amount of their monthly utility bills when tax time rolls around.

The double-edged sword

Employees aren’t entirely out of luck at tax time. Freelancers may be able to include WFH deductions at tax time in Hayward, CA, but they’re also left to pay both the employer and employee taxes owed the state and federal government.

Depending on their location in the United States, the money employees save by having their employer pay half their taxes could equal or surpass the amount freelancers can using WFH deductions.

Managing payments

If you’re unable to cover the entirety of your tax bill, you’re not alone (and you’re not the first). Talk to a veteran CPA to set up a payment schedule with the IRS. You can break down one lump sum payment into manageable installments. All it takes is the right team.

Get help today

Are you a WFH employee in Castro Valley, CA? Don’t let the next tax season take you by surprise. Contact Menjivar & Company CPAs, Inc. We have more than four decades of experience serving our community with impeccable tax services. We’re the tax pros who can handle everything from auditing to bookkeeping, payroll to tax prep and much more, and we’re happy to work with individuals as well as businesses to ensure your taxes are prepared and filed in a timely and accurate manner.

When you need affordable financial services from a seasoned expert who will work to ease your burden, make it Menjivar & Company CPAs, Inc. You won’t regret it. Call or contact us today!

Categorised in: