Nervous for Tax Season? Get a Plan Together Now!

Mark Steber

Chief Tax Information Officer

Published on: December 31, 2020

Share on social

You may think Tax Day is months away and you don’t need to start planning, but we actually recommend you start preparation now. Not only will this avoid potential refund shock, you’ll also have a better understanding of your financial situation and what you’ll need to bring to your first appointment with your Tax Pro.

A survey we recently conducted with Dynata found that 44% of respondents started thinking about their taxes toward the end of the year. This is not surprising as year-end is a great time to start organizing and preparing. Check out this tax document checklist that will also help you fully prepare for your appointment.

Another reason to begin planning sooner than later? This tax season will be different for a large number of taxpayers and there are a lot of misconceptions about the current tax law. For example: 77% of survey respondents misunderstand how the home office deduction works, believing that just about anyone can take the deduction.

Unfortunately, that’s not true. Just because you worked from home this year doesn’t mean you can deduct the space you use as a home office. In fact, this deduction ONLY applies to those who are self-employed.

Also, while 77% of respondents don’t plan to make year-end adjustments on their taxes (or just don’t understand their choices), it’s a good idea to understand your options for this year and to plan for 2021. This includes:

Increasing retirement plan contributions to maximize allowable contributions.
Making charitable donations.
Prepaying education expenses and mortgage payments.

Finally, the last reason to start planning now is there are constantly new updates and changes in tax law that could potentially impact you that you want to be prepared for.

For example, the Inflation Reduction Act (IRA) extended certain energy credits for homes and electric vehicles (EVs) through 2022 and they change beginning with 2023 tax returns.

Visit a Jackson Hewitt® office near you or schedule an appointment today to put a plan into place for when you are ready to file your 2022 income tax return.

Full survey results

Could you use an advance on your tax refund this year more than last year?

51%: Yes
49%: No

If you received an advance on your tax refund, what would you use most of it for?

27%: To pay major bills (rent/mortgage, medical bills, debt, etc.)
25%: I don’t want an advance on my tax refund
18%: To pay for essential items (groceries, school supplies, medical necessities, clothes, etc.)
15%: To put it into a savings or retirement account
7%: To purchase holiday gifts
6%: On home improvement purchases
3%: To pay for a fun purchase

Are you planning to make year-end financial adjustments to decrease your tax liability?

For example: increasing your retirement fund contributions or making charitable donations.

47%: No
30%: I'm unsure because I don’t know what my options are
24%: Yes

When do you normally start thinking about taxes?

44%: Toward the end of the year
38%: After W-2s come out
12%: Closer to Tax Day
6%: Mid-year/summer

Do you know how your tax return will be impacted due to employment changes from 2020?

For example, how collecting unemployment will change your earned income, or what it means to have a side gig or a change in your employment.

40%: I didn't have any employment changes in 2020
25%: No yet, but I plan to understand by the end of the year
20%: Yes
15%: No

How was your income, or earnings, impacted this year compared to last year?

47%: Earned the same
36%: Earned less
17%: Earned more

Have you been working from home this year?

61%: No
39%: Yes

Those who answered yes: Do you plan to take a home office deduction on your 2020 tax return?

53%: Yes
47%: No

Who do you believe can claim their home office as a deduction on their 2020 tax return?

38%: Anyone who works from home can claim the deduction as long as they work at least part-time
23%: Only those who are self-employed
17%: Only those who work full-time can claim the home office deduction
12%: Only if taxpayers were required to work from home during the pandemic
11%: Only available to taxpayers whose employers don’t pay or reimburse for office supplies

Did you or anyone you know get contacted by the IRS this year?

82%: No
12%: Yes, myself
7%: Yes, someone I know

Do you know the difference between short-term and long-term capital gains?

56%: No
45%: Yes

Methodology

The Jackson Hewitt survey was conducted online by Dynata on November 30, 2020 among 1,000 American adults aged 18 and older. Respondents to the survey were selected from those who volunteered to participate in online surveys. One thousand complete surveys were collected using the sample framework based on U.S. Census data for age, ethnicity, gender, region, and income.

About the Author

Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

More about Mark Steber Our Editorial Policy