Tax Concerns Run Rampant in Coronavirus Age
By JOSELYN KING
Americans received two rounds of economic stimulus checks in 2020, but they don’t have to pay taxes on this money.
They must, however, pay taxes on any extra unemployment benefits they received through the CARES Act last year.
“I think a lot of people are going to get a surprise tax bill because some might not have had withholding on their unemployment benefits,” said Connie Blatt, tax accountant with Zeno, Pockl, Lillly and Copeland, “If you remember, during the coronavirus people were getting extra. These people might get surprised.
“People may not think unemployment income is taxable, but it is. I think that is going to be the big one this year, with so many people collecting unemployment.”
The stimulus checks for $1,200 sent last summer, and for $600 approved in late December are considered non-taxable income, according to the IRS. The money neither increases the amount a taxpayer must pay, nor does it decrease the amount of the refund.
That said, those who haven’t yet received one or both of those payments might want to quickly make out their tax returns.
The IRS is using the 2020 tax return to pay anyone who didn’t get a second stimulus check before the Jan. 15 deadline through a Recovery Rebate Credit. The Recovery Rebate Credit may be claimed on line 30 of the 2020 tax return, according to the IRS.
Those who do not file a tax return, but who have not yet received their stimulus payment — will need to file Form 1040 or Form 1040-SR to claim the Recovery Rebate Credit
Those filing quicker are in a position to receive the money due them quicker.
“It is actually like a pre-credit on your taxes,” Blatt said of the Recovery Rebate Credit. “If you didn’t get the stimulus check, there will be a place on your tax form to put it.”
Those eligible for stimulus are single Americans with adjusted gross incomes of less than $87,000 annually, and couples reporting earnings less than $174,000.
Families are eligible to receive an additional $600 per child under terms of the most recent stimulus, but each child must have their own Social Security number to qualify.
Older children who can be claimed on their parent’s tax return won’t receive a stimulus check of their own.
This applies to high school and college students age 23 or younger who don’t pay at least half of their own expenses.
People are responsible for returning any stimulus money received under certain circumstances, according to the IRS.
Any checks received made out to some who died prior to Jan. 1 must be paid back.
If a recipient has an adjusted gross income that exceeds specified limits — such as $87,000 a year for a single taxpayer — they must return any stimulus money received.
Stimulus checks also must be returned by those considered as “non-residents” in America who are without an American spouse. A “nonresident alien” is defined by the IRS as someone who is not a U.S. citizen, who doesn’t have a green card, and who is not physically present in the U.S. for an extended time.
Also not eligible for stimulus checks are non- U.S. citizens who do file federal taxes, and anyone without a Social Security number.
There are no additional tax breaks built in this year to assist those whose earnings for 2020 were significantly less than in past years, according to Blatt.
Tax filers can take a deduction this year of up to $300 in charitable contributions for giving cash to eligible 501-C charities, she said.
“Before you always had to itemize to take a charitable contribution,” Blatt said. “This year, if you have given at least $300 to a qualified 501-C, you can take that as a deduction without having to itemize.”
The Internal Revenue Service urges taxpayers to be on the lookout for a surge of calls and email phishing attempts about the Coronavirus, or COVID-19. These contacts can lead to tax-related fraud and identity theft.
Retirees often are targets of such scams.
Seniors should be especially careful during this period. The IRS reminds retirees — including recipients of Forms SSA-1099 and RRB-1099 — that no one from the agency will be reaching out to them by phone, email, mail or in person asking for any kind of information to complete their economic impact payment, also sometimes referred to as rebates or stimulus payments. No additional action or information is needed on their part to receive this.