According to Experian, the stimulus money is not considered taxable income. Any direct stimulus funds will not increase the amount of tax owed when on a 2020 federal tax return and will not decrease any refund for the 2020 tax year.
According to CNBC, there are three key issues that can affect the income tax refund for working families that received stimulus payments in 2020.
The first is the unemployment insurance withholdings. Recipients should check to see if income tax was automatically deducted by the state at the time of payment. This will have an impact on the total amount of income tax owing.
The second applies to people who may not have received a stimulus check but whose income fell significantly. It is quite possible they will qualify for a stimulus credit which will provide a larger than normal tax refund.
The third issue which may affect taxpayers is the payroll tax deferral which was automatically applied to federal government employees and may have been also applied to some in the private sector. Those who were affected could see a slight reduction in their net pay starting in January 2021.
Summary of early findings
Our initial hour of research showed that both government and media publications consistently state that there will be no negative impact on any taxpayer for the stimulus payments in 2020. There are also possible positive impacts for people who have not received a stimulus check but whose income dropped significantly in 2020.
Only the project owner can select the next research path.