As employees return to work in Ohio, questions remain about how 2020 tax returns could be affected by the stimulus money that many Americans got as part of the CARES Act. We ask an expert in this edition of “OH Really?”
The stimulus payments, or Economic Impact Payments, were sent out this spring during the coronavirus pandemic. They’re what’s known -- from a tax standpoint -- as an “advance payment of a refundable credit.”
University of Akron Tax Professor Melanie McCoskey says if you received stimulus money – or even if you were supposed to, but haven’t yet – you won’t have to pay tax on it, and it won’t decrease any refunds you might get on the tax return you’ll file next year.
“Let’s say that your refund, as you regularly calculate it, was $1000. Then you say, ‘I was supposed to get $1200 [and] I did get $1200, so there’s no change to my refund.’”
McCoskey’s advice is to keep track of how much you received, since it’s unlikely the government will send out statements to taxpayers.
What about unemployment?
Since the beginning of the coronavirus pandemic, close to 1.3 million people have filed unemployment claims in Ohio – more than the total over the past three years.
The record number of filings crashed the state’s unemployment website earlier this year as businesses closed, people were laid off, and the unemployment rate in Ohio climbed to nearly 18 percent in April.
McCoskey says at tax time next year, you may owe the government money if you elected not to withhold taxes when you filed.
“Unemployment compensation is taxable. The reason for that is: it’s there to replace lost wages -- and those wages would have been taxable -- therefore the unemployment compensation is taxable.”
And that would apply to benefits even if there wasn’t a pandemic. McCoskey adds that the government will send out 1099 forms to people who received benefits.
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