What to Know About COVID-19 Stimulus Checks, Federal Unemployment When Filing Your 2020 Taxes

(KNSI) – Tax Day is less than two months away, and many in 2020 experienced a financially difficult or otherwise financially different year. How do stimulus checks and boosted unemployment payments factor into this year’s taxes?

Tyler Deters, senior staff accountant at Landwehr Tax & Accounting, says if you received one or both of the COVID-19 stimulus payments authorized in 2020, you don’t owe taxes on that money.

“The stimulus payments were just an advance tax credit, so that is not taxable income to the taxpayers,” Deters said. “For people who did not receive those stimulus payments, they will have one final opportunity to claim them on their tax returns.”

Deters notes that even though most people who received the second federal stimulus payment ($600 per adult and $600 per child) got that money in 2021, the bill that authorized those payments was signed in 2020, so they count as 2020 advance tax credits.

Unemployment payments, however, are taxed.

“The additional $600 a month the federal government sent out in addition to the state benefits will also be taxable income,” Deters said. “That ends up on your tax return, similar to any other wages from a job, and would then get added with all of your other stuff and taxed at normal income tax rates.”

There’s an incentive to file early this year; Deters said it is possible that a future stimulus bill could base payments off of 2020 income.

“Obviously, the bill is not passed yet, so how that would actually work is all speculation, but to be safe, they are telling people to file soon,” Deters said.

But Deters also says not to rush when filing your taxes since many people might see changes that affect their tax situation this year.

“There’s a lot of new legislation this year, a lot of changes, so people should definitely be patient if there’s unique situations that they’re dealing with, or if they received stimulus [checks] or not,” Deters said.

One change: the standard deduction is now $12,400 for singles, $24,800 for married filers and $18,650 for single heads of households. Federal income tax brackets have also shifted a bit since 2019.