Geltrude & Company Managing Partner Daniel Geltrude joins Yahoo Finance's All Markets Summit Extra: Tax Time to discuss what to expect ahead of this year's tax filing deadline.
RACHELLE AKUFFO: Welcome back to Tax Time sponsored by Straight Talk Wireless. Yahoo Finance's Ronda Lee is back with us, along with Geltrude & Company founder Dan Geltrude. So Dan, I want to bring you in here. A lot of people are sort of looking at the clock, getting a little bit stressed out. Perhaps their finances, their receipts are a bit of a mess. What are the first steps people should take in sort of deciding whether or not to file an extension or to try and rush to the finish?
DANIEL GELTRUDE: Well, you should never really rush through the process of having your tax return prepared because you want to make sure that your tax return is complete and accurate. The last thing that you want to have happen is, you file your tax return in a rush, and then in 30 days or 45 days, you get a nice letter from the IRS, saying, oh, there was a problem with your tax return. So you certainly don't want to rush through the process.
However, if you know that you're going to be getting a refund, you certainly want to file that tax return as quickly as possible because you don't want the government holding your money. At the same time, if you know that you're going to have to pay with your tax return, well, then, you truly wait to hit that button or put it in the mail until the last minute possible.
RONDA LEE: Hi, it's Ronda. So I want to focus in on-- are people who they owe. And a large chunk of them wait until the last minute because like you said, you don't want to hold on, give the government that money. For people who are not paying electronically, and they're putting that check in the mail, or they're thinking about paying by cash, what tips do you have for them? Like, if they're going to do it by mail, it used to be people would run to the post office at 11:59. Is that a good idea, or should they be sending those mail-in checks via next day delivery?
DANIEL GELTRUDE: Well, as long as the envelope is properly stamped by the due date, in this case, April 18, sending your check through the mail at that last moment-- and by the way, you should also do that by certified receipt to make sure that you can prove timely filing and timely payment-- that's really the way to go. Of course, if you're electronically filing, you could have those funds wired directly from your account. So either way, that's preferred.
Now, there are people who say, well, I would like to be able to pay my credit card. And certainly, you can do that. However, when you are paying your tax bill by credit card, the IRS is actually going to hit you with a service fee. So why do that? They're taking enough of our tax dollars. I don't think that we have to add a service fee into that number in order to pay our tax bill. So I think regular mail on a timely basis by certified mail or electronic filing with the funds coming directly out is the way to go.
AKIKO FUJITA: Dan, let's talk about a lot of provisions that people are thinking about now-- what are we-- second year, third year into the pandemic. Work from home was a big one, and I know a lot of Americans claimed deductions last year, whether it was their rent, the equipment they purchased in order to be able to work from home. What's changed?
DANIEL GELTRUDE: Well, we actually have to go back to the tax law changes under the Trump administration. And during that time, most of the itemized deductions disappeared. And one of those related to having those home office deductions. Those disappeared. Now, what happened during the pandemic-- and this was a question that I got all the time-- well, I'm working from home, and I am incurring various expenses related to being able to do my job. And that's the most important aspect here, to do my job from home.
Well, if you are an employee, meaning that you are getting a W-2 for the work that you do, you are not entitled to take those home office deductions. So that was problematic and a surprise for people going back a couple of years ago. It was more of a hurt when they said, well, now, I'm working at home because of the pandemic. If you're going to be able to take those types of deductions, you actually need to be an independent contractor-- in other words, having your own business. Now when you do that, you are entitled to take all of those expenses related to your business activity as a deduction against your income. But you can't do it as an employee.
RACHELLE AKUFFO: Now as we stay with this topic of COVID, we saw a lot of generosity, a lot of people giving to a lot of good causes, GoFundMes to help perhaps people who were struggling, charities. But what do people need to know about what does and doesn't count as charitable giving, as defined by the IRS?
DANIEL GELTRUDE: Well, when you're talking about giving money to charity, that is supposed to be specifically for a charity recognized by the IRS. Sometimes you hear that 501(c)(3) thrown out there. So yeah, that is recognized as a public charity for which when you make a donation, you are able to get a tax benefit for. Now, what's happened over time, again, I go back to the changes made through the Trump administration. Many of-- if you are not itemizing your deductions, for example, because the standard deduction was raised so high, people were not getting any benefit from making charitable donations.
So what we have there is if you are single, whether you itemize your deductions or not, you are able to deduct $300 of charitable giving, or if you're married, filing jointly, you can take up to $600. So even if you're not itemizing your deductions, there are still some benefits to be had by making charitable donations to recognize charities.
AKIKO FUJITA: And Dan, one more question here as we stay on the COVID theme, because I understand there's some changes with unemployment benefits between last year and this year, a lot of people still having to file on that as well. What should they be aware of?
DANIEL GELTRUDE: Well I think there's going to be a lot of people in for a surprise this year when they're filing their tax returns related to unemployment benefits that they received. Because if you go back to 2020 because of the pandemic, the federal government said, you know what? We are not going to be taxing unemployment benefits. OK, great. But that expired going into 2021.
So what happens is, is that there were people obviously still receiving unemployment benefits last year, and they didn't consider that it was going to be taxable. Therefore, they didn't make estimated tax payments or have the appropriate withholding. Now they go to file their tax return, let's say, this week or into next week, and what do you know? I thought I was getting a refund, but now I have to pay because my unemployment benefits are now taxable. So that's one thing that people have to be aware of that they could be in for a surprise.