WILLIAMSPORT, LYCOMING COUNTY (WBRE / WYOU-TV) – Friday marked the start of tax filing season, and many aren’t sure how COVID-19 stimulus payments and other relief efforts could affect their 2020 returns.
In a way, it seems fitting that such an unorthodox year should end with an unorthodox tax return. However, experts say that dealing with stimulus payments when filling in your 2020 return on investment may be easier than you think.
Bucknell University accounting professor Stacy Mastrolia says the most important thing to remember is that you will not be taxed on these payouts.
“The stimulus payments are absolutely not taxable. They were not income; It was pre-allocated loans. “
While you must report the incentive as a credit, Mastrolia says, as long as your income is within federal parameters and you received the correct amount, your refund will not be affected.
“You will only state this on your tax return and it will have no effect on whether you would receive more or less money. You have already received the credit. “
And if your income were to take a hit in 2020 due to the pandemic, you might actually get good news.
Because the stimulus payouts were based on your last filing, a person whose income has dropped below the stimulus threshold in the past year can get back the money that should have been paid to them – what is known as a recovery discount.
“They could actually see that a credit was returned to them as part of their tax return,” Mastrolia said.
George Rizzo is the president of the Williamsport accounting firm Klein and Rizzo. He says if you put in the amount of stimulus you received on your submission, you can only win.
“It calculates an amount of stimulus that you should receive based on that 2020 filing and subtracts the amount that you received previously.”
This is because the government does not reclaim checks that have been mistakenly sent to anyone above the income threshold, but rather all checks that have not received proper payments.
“If you are entitled to more money than you received, you will get more money. If you have more money than you are due, they won’t ask for a refund, ”said Rizzo.
One important note: while these stimulus checks are not taxed, unemployment payments, including those received from funds under the CARES Act, are considered taxable income as normally provided for under US tax law.
And because federal income tax withholding from unemployment benefits is not mandatory, some people may actually owe that difference to the IRS on April 15th.