BALTIMORE — Tax season is finally upon us and while many people did their taxes virtually last year as a cause of the pandemic, there's confusion on what financial support this year has on your taxes.
We reached out to the CASH Campaign of Maryland to set the record straight on some of those questions.
Many may be worried about whether or not those stimulus checks you received affect how your return would look. Francesca Jean Baptiste, Director of Tax Partnerships, CASH Campaign of Maryland says that those payments do affect your taxes, but not in the way that people think.
"We know that there's a lot of information about what the stimulus checks actually are, but they're really an advanced tax credit that was paid last year at the beginning of the year to really help folks out during these tough pandemic times," she explained. "The stimulus payments are not taking away from your tax return, because the credit didn't actually exist until Congress passed the CARES act."
She explained that for folks that weren't able to get their advanced payments, there's still an opportunity for them to do so by filing for what's called the Recovery Rebate Credit on their 2020 tax return.
"So nothing taken away, nothing added, but if you got less than you were supposed to, because the first round of payments was based on either a 2018 or 2019 return, you would get the difference if you were owed additional," she said. "And if you got too much, well, the IRS hasn't said that that's going to impact anything, you just lucked out."
Unemployment unfortunately is a different story.
Jean Baptiste said what those receiving unemployment need to know is that unemployment is taxable. Even if that's the only income that was received in the household all year, it still must be reported on the tax return and does require taxes to be paid on it.
"Years ago when we were in another economic crisis, Congress did make the ability to have unemployment, not be included in taxes. They did not do that this year," she explained. "One of the good things that Congress has done in order to help some help boost some folks around tax time is they've allowed for an earned income tax credit look back."
The earned income tax credit is a credit for people who work, but don't have very high incomes.
"What the IRS is able to do is look back at 2019 to see if people had actual earned income in 2019 to help them use that income, to receive the earned income tax credit because unemployment is not considered earned income," Jean Baptiste said. "So a lot of folks are not going to get access to the earned income tax credit based on the 2020 income they received. So they are able to look back to the 2019 wages that they had and use that as a way to bolster their tax refund by utilizing the earning of tax credit."
Jean Baptiste explained that it's extremely important to file early, so that when the IRS does open their processing, all the tax returns are ready to go out in the queue. You don't want to wait until the last minute because you don't want to be at the bottom of their processing rate.
While the CASH Campaign of Maryland is a nonprofit organization, they say their top priority is to make sure they provide a quality and accurate tax return for every person that comes through their doors or uses any of their services.
CASH has free tax prep sites in Baltimore and across Maryland either all virtually or with drop-off services. They also offer free tax preparation software as well. All of that information can be found here.