{"id":52868,"date":"2021-02-19T10:36:00","date_gmt":"2021-02-19T16:36:00","guid":{"rendered":"https:\/\/www.hrblock.com\/tax-center\/?p=52868"},"modified":"2025-03-13T13:38:31","modified_gmt":"2025-03-13T18:38:31","slug":"coronavirus-tax-impacts","status":"publish","type":"post","link":"https:\/\/www.hrblock.com\/tax-center\/filing\/coronavirus-tax-impacts\/","title":{"rendered":"Top 5 ways coronavirus impacts could affect your taxes"},"content":{"rendered":"\n

2020 was a year unlike any other. While the economic shutdown affected people in an instant, the financial repercussions for many will be lasting\u2014taxes are no exception. <\/p>\n\n\n\n

In fact, many of these impacts have the potential to add complexity and uncertainty to your tax filing, perhaps more so than in other years. According to an H&R Block survey in January 2021, 56% of tax filers have more<\/em> questions than they did last year.<\/p>\n\n\n

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If you feel the same, please know this\u2014we\u2019re here to help you understand the ways coronavirus impacts and changes from the past year can affect your taxes. In this article, we list the top concerns many have, so you can be more prepared. Plus, we\u2019ll explain potential actions you could take now.<\/p>\n\n\n\n

Before we jump in, let\u2019s cover the 2020 stimulus payments. The good news is you won\u2019t need to report anything as income on your return, but you should keep your Notice 1444 and Notice 1444-B from the IRS for your records. (See an example of a 1444-B notice<\/a>.)<\/p>\n\n\n\n

What about a change in income or other life changes that affected your stimulus eligibility<\/a>? If you received less stimulus money than you should have, you should receive the difference when you file your 2020 return in most cases through a Recovery Rebate Credit.<\/a> Don\u2019t worry if you received too much; you won\u2019t have to pay it back.<\/p>\n\n\n\n

Now, with the stimulus question addressed, let\u2019s look at five common situations borne out of the pandemic and review the corresponding coronavirus tax impacts.<\/p>\n\n\n\n

Coronavirus tax impact #1 \u2013 Claiming unemployment<\/h2>\n\n\n
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Americans are claiming unemployment in higher numbers than ever before. If you\u2019ve never collected unemployment benefits, you might not realize that unemployment income is taxable<\/a>\u2014not just on the federal level, but on the state level too in most states.<\/p>\n\n\n\n

When you file, you\u2019ll need to include that income on your tax return. How will you know what to report? Your state will send you Form 1099-G,<\/a> which will show the amount of unemployment compensation paid to you during the year. If you repaid a portion of the benefits received, you can reduce the benefits received by the amount repaid.<\/p>\n\n\n\n

What you could do now:<\/strong> To get an idea of how your unemployment income will affect your 2020 return, enter your unemployment income and any amounts withheld into our Tax Calculator<\/a>. If you\u2019re still receiving benefits, you can choose to withhold so you\u2019re paying some of those taxes as you go vs. all at once at tax time for next year. At the federal level, you can only withhold at a flat rate of 10%. The withholding rate for state taxes will vary based on each state.<\/p>\n\n\n\n

The following 15 states don\u2019t tax unemployment income: Alabama, Alaska, California, Florida, Montana, Nevada, New Hampshire, New Jersey, Pennsylvania, South Dakota, Tennessee, Texas, Virginia, Washington and Wyoming.<\/p>\n\n\n\n

Coronavirus tax impact #2 \u2013 Taking on multiple jobs<\/h2>\n\n\n\n

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Taking on extra jobs or taking on a temporary job to make up for lost hours can help keep up your cash flow. However, this change in work due to coronavirus will also impact your taxes. Here\u2019s why: More jobs mean more complex income tax withholding (the money held out from your paycheck).<\/p>\n\n\n\n

Think of your withholding as a careful balance between bringing in more take home pay each paycheck or potentially receiving a bigger tax refund. When you add other jobs to the mix, the balancing act gets trickier.<\/p>\n\n\n\n

That said, you need to have your W-4 forms completed correctly to ensure you don\u2019t have a surprise at tax time. You can update your paycheck withholdings by completing new W-4 forms.<\/p>\n\n\n\n

If you\u2019re doing contract work (where you don\u2019t receive a W-2), you should make quarterly estimated payments<\/a> to keep on top of your tax obligations as these jobs don\u2019t withhold any money for taxes.<\/p>\n\n\n\n

What you could do now:<\/strong> Luckily, we have a W-4 calculator<\/a> that lets you account for multiple jobs for you (and your spouse) \u2013 even if you\u2019re no longer working at one of the jobs. After you answer a few questions and enter your information, you\u2019ll complete the process with a new W-4 to take to your employer. This will let you make changes going forward that will apply to tax year 2021.<\/p>\n\n\n\n

Coronavirus tax impact #3 \u2013 Receiving relief for student loans<\/h2>\n\n\n\n

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If you\u2019re one of many taxpayers with a student loan, the CARES Act<\/a> may have provided temporary help through the financial crunch in two ways. Until Sept. 30, 2021 (thanks to recent extensions), the legislation:<\/p>\n\n\n\n