This year, to support economic relief from the COVID-19 pandemic, Congress passed a new ‘lookback rule’ which means if you earned less in 2020, you can use either your 2019 or 2020 income on your taxes—whichever one gets you the most money back.
File a tax return to see if you can get more money back this tax season using the ‘lookback rule’.
How does the Lookback work?
The Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) are credits that lower your taxes and can give you a tax refund. You can claim the credits whether you’re single or married. The EITC is available for people with and without children (see EITC eligibility) even if you don’t owe taxes.
For Tax Year 2020, if you earned less in 2020 than in 2019, you can “lookback” to use your 2019 income or use your 2020 income when claiming the EITC or ACTC on your taxes.
Without the lookback option, many would be eligible for smaller tax credits or not qualify at all. This could be from receiving unemployment (which doesn’t count as earned income for the EITC), losing a job, or earning less money in 2020.
If you’ve gotten the EITC in the past and are unsure of what to expect because of employment changes, don’t worry! You may still be eligible for a sizeable refund with the lookback option.
How do I know which year’s income to use?
For the lookback, you’ll first need to know your total earned income – not Adjusted Gross Income (AGI) – from 2019 and 2020. If you earned less in 2020 than in 2019, then you can choose which income to use. If your 2020 earnings were higher than in 2019, you must use your 2020 income.
Earned income (not Adjusted Gross Income – AGI) can be from wages, salary, tips, employer-based disability, self-employment income, military pay, or union strike benefits. It does not include unemployment insurance.
Once you have both figures, it is best to find professional tax help. Depending on your financial situation, the lookback may be complex to calculate. This is especially true if you received unemployment insurance in 2019 or 2020 or if you had self-employment earnings during either year.
What other tax benefits should I look out for?
If you didn’t get your first or second stimulus checks, you can still claim them as tax credits. The stimulus check is a federal tax credit for the 2020 tax year, known as the Recovery Rebate Credit. You can claim the Recovery Rebate Credit by filing your taxes in 2021 for Tax Year 2020.
Where can I get tax help?
Every dollar counts. Use free tax help to maximize your hard-earned dollars and keep more of your money in your pocket. Have your 2019 tax return available when you do your taxes this year to make it easier.
If you need free help claiming your EITC and ACTC, you can:
- Visit Code for America’s Get Your Refund website to connect with an IRS-certified volunteer that can virtually help you file your taxes for free.
- Contact your local Volunteer Income Tax Assistance (VITA) or AARP Foundation’s Tax-Aide site to get free tax help from an IRS-certified volunteer.
If you don’t qualify for free tax help through these services, you can file your own taxes for free using MyFreeTaxes.com. Support is available through online chat.
The deadline to file your taxes this year is April 15, 2021.