FAQ: Important Tax Information on Covid-19 Stimulus Payments and Unemployment Benefits

Posted on: February 23, 2021

The information provided on this post does not, and is not intended to, represent legal advice. All information available on this site is for general informational purposes only.

If you need legal help, you should contact a lawyer. You may be eligible for our free legal services and can apply by calling our Covid Legal Hotline at 1-844-244-7871 or applying online here.

Updated February, 18, 2021

Do I need to pay taxes on the stimulus payments I received from the federal government?

No. The federal government sent two rounds of stimulus payments to eligible individuals and their dependents under 17 years old. The first round was for $1200 for adults and $500 for eligibile dependents, and the second round was for $600. This is different from unemployment benefits you may have received. These payments are NOT taxable income, so you do not have to declare them on your 2020 return or pay taxes on them.

What if I did not receive my stimulus payments?

If you did not receive your stimulus payments:

  • Were you claimed as a dependent on another person’s tax return? That person may have received the stimulus payment for you.
  • Did you receive a “Refund Anticipation Loan” (RAL) when you filed your 2018 or 2019 return? The tax preparer may have received the stimulus payment in a bank account set up for you. You should contact the tax preparer.
  • Were you divorced or separated in 2020? Your spouse or former spouse may have been sent the stimulus payment.
  • If you did not file a 2018 or 2019 tax return and did not register on the IRS website, the IRS may not have known where to send your stimulus payment.

If you have not received your stimulus payment, or believe someone else wrongly received your stimulus payment, you should electronically file a 2020 tax return now, claiming the credits for the stimulus amount.

  • You can do this even if you did not work in 2020 or did not have enough income to need to file.
  • If your claim for a stimulus payment refund is denied by the IRS, you will have 30 days to submit a written appeal.

Do I need to pay taxes on my Unemployment Benefits?

Yes. Unemployment benefits are like wages, and you must report it as income on your tax return if you earned enough income to need to file taxes.

  • You should have federal and state income tax deducted from your unemployment benefits, if possible.
  • The Louisiana Workforce Commission should issue you a 1099, which will tell you how much you received. You’ll use this amount when you file your taxes. If you were not sent a 1099, use your own records to report.

If I withdrew money from an IRA or Retirement Account, will I need to pay taxes on it?

Yes. It is taxable income that must be reported on your tax return.

  • Normally, if you withdraw money before the age of 59 ½ years, you must pay a 10% early withdrawal penalty as well as the usual income tax.
  • Due to the pandemic, Congress has changed the rule for withdrawals made in 2020, so you do not have to pay the early withdrawal penalty.
  • You can also spread the withdrawal over 3 years, if you cannot pay tax.

Organizations that Provide Free Tax Preparing and Filing

Volunteer Income Tax Assistance Program (VITA Program) https://www.unitedwaysela.org/vita

AARP Foundation Tax-Aide provides taxpayers 60 and older with low income with free tax help.

You can also go to irs.treasury.gov/freetaxprep to search for other free providers.

Be sure to protect yourself when filing your taxes or having them filed for you!

If you are filing your own taxes:

  • You can prepare your own taxes using software or forms downloaded at this website. You will have to create an online account to do this and will need to provide an e-mail address.
  • Low Income taxpayers can file electronically for free on this website.

If you are having someone else prepare and file your taxes:

  • Watch out for fraudulent tax preparers putting false information on your return or stealing your identity. Putting false information on your tax return is a crime. Only you are responsible for your tax return. If you receive a fraudulent refund, YOU will have to pay it back, not the tax preparer. Fraudulent tax preparers may try to steal your identity and file false returns in your name. The IRS has put together a directory of qualified tax preparers here.
  • It is illegal for a tax preparer to charge you a percentage of your refund. The preparer should quote you a set fee.
  • The tax preparer must ask you for documentation of your income, deductions, etc. If they do not, your tax return will not have accurate information.
  • DO NOT sign blank or incomplete returns. Your preparer must sign the return with you.
  • DO NOT allow the preparer list a bank account under their name for your refund to be sent to.

The SLLS Tax Clinic cannot electronically file your current tax return.

SLLS may be able to offer free help if you:

  • Federal taxes and cannot repay them.
  • Are being audited.
  • Need to file for Injured or Innocent Spouse relief.
  • Have been the victim of ID theft with the IRS.

To apply for services, call Lynnette Tillis toll-free at (877) 521-6242, extension 225, or apply on our website here. 

 

 

 

 

 

 

 

 

 

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