Last year was an uncertain year for everyone as COVID-19 paralyzed the world, including the economy and the pocketbooks of millions of Americans. The government responded with the CARES Act and Paycheck Protection Program (PPP). More recently, the government passed the American Rescue Plan Act of 2021.
But the uncertainty doesn’t end with the signing of a new stimulus bill. Headed into the end of tax season, many Americans are wondering what this legislation means for their 2020 filings. Have these new tax laws significantly affected your 2020 filing?
FAQs for Tax Laws for 2020 Filings
To assist, we’ve put together a list of common questions taxpayers have related to their 2020 filings. For specific questions, reach out to one of our CPAs.
1. Will the stimulus check money I received be taxed on my 2020 filing?
No. Technically, all Economic Impact Payments, aka, “stimulus checks,” are considered refundable tax credits. The amounts are not counted toward your gross income, and therefore will not be taxed.
2. I didn’t qualify for stimulus money based on my 2019 return, but I would qualify now given the current economic situation. Is there a way I can update my info and receive payments?
If your income now qualifies you for stimulus payments, you need to file your 2020 tax return as soon as possible. The IRS will use this information to send you the most recent round of stimulus money ($1400 based on the American Rescue Plan). Once they have your info, the IRS will then send you a direct deposit, check, or debit card.
3. If my business received a Paycheck Protection Program loan, will that be taxed?
PPP loans are also excluded from gross income on your 2020 filing. Forgiven expenses, however, are not deductible. To file for loan forgiveness, contact your lender for the required documentation.
4. I dipped into my 401(k) to cover expenses. How will that money be taxed?
The CARES Act made provisions for a “hardship withdrawal” of up to $100,000 for individuals who tapped their retirement accounts in 2020. Withdrawal penalties are waved up to that $100,000 amount.
This doesn’t mean that money goes entirely tax free. You will still pay income taxes on withdrawals from 401(k)s and IRAs. Pay attention to whether these withdrawals put you into a new tax bracket.
5. Speaking of tax brackets, did those change in 2020?
Tax brackets changed slightly to adjust for inflation. Reference the chart below to check your bracket and marginal tax rates for the 2020 tax year.
From the IRS:
| 2020 Marginal Tax Rates | Single Tax Bracket | Married Filing Jointly Tax Bracket | Head of Household Tax Bracket | Married Filing Separately Tax Bracket |
| 10% | $0–9,875 | $0–19,750 | $0–14,100 | $0–9,875 |
| 12% | $9,875–40,125 | $19,750–80,250 | $14,100–53,700 | $9,875–40,125 |
| 22% | $40,125–85,525 | $80,250–171,050 | $53,700–85,500 | $40,125–85,525 |
| 24% | $85,525–163,300 | $171,050–326,600 | $85,500–163,300 | $85,525–163,300 |
| 32% | $163,300–207,350 | $326,600–414,700 | $163,300–207,350 | $163,300–207,350 |
| 35% | $207,350–518,400 | $414,700–622,050 | $207,350–518,400 | $207,350–311,025 |
| 37% | Over $518,400 | Over $622,050 | Over $518,400 | Over $311,025 |
6. What is the Standard Deduction for my 2020 filing?
Like the adjusted tax brackets above, the standard deduction increased to adjust for inflation, not because of an entirely new law. Still, it’s important to be aware of standard deduction rates as you decide how to process charitable giving and other deductions. The changes this year are marginal.
From the IRS:
| Filing Status | 2019 | 2020 |
| Single | $12,200 | $12,400 |
| Married Filing Jointly | $24,400 | $24,800 |
| Married Filing Separately | $12,200 | $12,400 |
| Head of Household | $18,350 | $18,650 |
7. I received unemployment benefits last year. How is that income taxed?
The American Rescue Plan was a new law passed in early 2021. It has large ramifications for unemployment benefits received in 2020. Now, you can exclude the first $10,200 in benefits from federal income tax for households with incomes below $150,000 a year.
That change will either decrease how much you owe the IRS or increase your refund, with the latter being most likely.
8. How much can I contribute to my Health Savings Account (HSA)?
HSA contribution limits were raised to $3,550 for individuals or $7,100 for families. If you did not meet those limits during the 2020 calendar year, you may add to your HSA before filing day on April 15th.
9. I donated to charity in 2020. Have any new tax laws changed how I report that giving?
With the relatively new Standard Deduction limits, many Americans opt to take the standard deduction instead of itemizing charitable giving. In this particularly difficult year, however, the CARES Act decided to encourage extra charitable giving. You may deduct up to $300 in charitable donations on top of your Standard Deduction.
Taxes may seem overwhelming this tax season. New tax laws have added a new layer of complexity to an already complex system. To make sure you file correctly, consult with Perry & Associates. Give us a call today.