Questions arise whether stimulus checks, unemployment payments will impact tax returns

Posted at 4:14 AM, Jan 07, 2021
and last updated 2021-01-07 16:50:37-05

NORFOLK, Va. -- The second round of stimulus checks are making their way into people's bank accounts, but the checks have not just raised account balances - they've also raised questions. That is according to the tax professional Scott Rinehart.

"I think a lot of people are afraid that these stimulus checks are going to put them into a higher tax bracket or something like that,” Rinehart said.

A higher income means a higher tax rate, but as Rinehart said, "Stimulus checks - those are not taxable whatsoever."

Rinehart explained the stimulus checks are a form of a tax credit. The IRS determined who gets the stimulus if their income was below $75,000 for a single filer.

“If you had income go down in 2020, you might actually be eligible for the stimulus,” Rinehart explained. “You're just not going to receive it right now; you're going to receive it when you file your taxes."

If you did receive unemployment benefits, that, Rinehart said, is taxable if you did not have any taxes withheld.

"You probably won't owe a lot because if you were on unemployment,” Rinehart explained, “there's a chance your income was a little bit lower than what your normal salary was."

That also means you will get extra forms and documents to file along with your other forms such as W-2s.

"There's going to be some unique things about this tax season, for sure,” Rinehart said. “For tax preparers and taxpayers."

The CARES Act also allowed taxpayers to withdraw money from their retirement funds tax-free. Rinehart said that will need to be shown on the income tax forms.

He also reminded people that those who worked from home cannot claim personal expenses such as utilities used or equipment bought on their tax returns. The exception is if you are self-employed.

"I think you need to be a little more on the ball,” Rinehart said, “a little more engaged in the process because it's going to be a unique year."

Tax Day is April 15.