By Christine Tran, 2021 Get It Back Campaign Intern
Due to the COVID-19 pandemic, this tax season has many important changes. Update: The tax filing deadline has been extended to May 17, 2021!
With widespread job loss, millions are struggling to put food on the table, make rent, and pay for basic expenses. In response, Congress has passed many economic relief measures to support people through these difficult times. Here’s what you need to know to get the most out of your tax refund this year.
Some of these economic relief measures can lead to a bigger tax refund this year. Here are the highlights:
- Claim your stimulus checks on your tax return (IRS Notice 1444 and/or Notice 1444-B): If you didn’t get your first and/or second stimulus check or didn’t get the full amount that you are eligible for, you can claim them as part of your tax refund. Notice 1444 shows the amount of your first stimulus check and Notice 1444-B shows the amount of your second stimulus check. To claim the rest of the stimulus checks on your tax return, you’ll need to know the full amount that you have already received. You don’t need the notices if you haven’t received any of the checks or you can remember the amounts.
- File your unemployment benefits (Form 1099-G): Unemployment benefits are taxable and will need to be reported. For Tax Year 2020, your first $10,200 will not be taxed if your income is under $150,000.
- Take advantage of the ‘lookback’ rule: The ‘lookback’ may help you get a bigger Earned Income Tax Credit and Child Tax Credit refund. Bring your 2019 tax return when you file taxes to take advantage of the new rule.
Keep reading to learn more about stimulus checks, unemployment benefits, the lookback rule, and how they can affect your taxes this year.
Most people received their first and second stimulus checks in 2020 and early 2021. A third stimulus check was just passed and is being distributed. The stimulus checks are not considered income and you do not have to pay taxes on them. In other words, you don’t have to include the stimulus checks on your tax return.
If you haven’t received your stimulus checks or haven’t received the full amount that you are eligible for, read What do I do if I didn’t get my first or second stimulus checks? to learn how to claim your stimulus checks as a tax refund by filing your taxes this year (for Tax Year 2020).
Unemployment Benefits and Form 1099-G
If you claimed unemployment benefits in 2020, then you should have received a Form 1099-G, Certain Government Payments from your state unemployment office by the end of January 2021. Your Form 1099-G will show the total amount of unemployment benefits you have received, along with any state and federal taxes you had withheld.
Unemployment benefits are considered taxable income, so you will need to report unemployment on your federal tax return. This year, due to economic relief for the COVID pandemic, you will not have to pay taxes on the first $10,200 of unemployment you received in 2020 if your income is under $150,000. To learn more about how unemployment benefits are taxed, read Do I Have to Pay Taxes on my Unemployment Benefits?
If you received a Form 1099-G, but didn’t claim unemployment benefits, then you may be a victim of identity theft and fraud. Contact your state unemployment office to report and correct this issue.
The Lookback Provision
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 then you did in 2019, you can use either your 2019 or 2020 income to calculate your Earned Income Tax Credit (EITC) and Additional Child Tax Credit (CTC) —whichever one gets you the most money back.
You will need your 2019 tax return to take advantage of the lookback. 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.
If you are filing taxes on your own, read about how you can find your earned income to take advantage of the lookback.