Covid-Relief and Your 2020 Tax Return

With people getting ready to file their 2020 taxes, HomeUnemployed presents some important information to keep in mind, and how government programs might affect your taxes.


With people getting ready to file their 2020 taxes, here are some changes to taxes this year based on the Covid Relief bill.  In addition, see how the most common government Covid-Relief programs for individuals are taxed. 


Unemployment offers weekly payments for people who are not working full time.

Federal taxes apply to all unemployment payments. State taxes depend on the state (NY and NJ both have state taxes on Unemployment).

“Standard payments” and “bonuses” are both taxable
  • Standard payments
    • Weekly payments, either regular Unemployment (UI) or Pandemic Unemployment Assistance.
  • Bonuses
    • 17 weeks of $600 FPUC (04/05/2020-07/25/2020)
    • 6 weeks of $300 LWA (08/02/2020-09/06/2020)
    • 11 weeks of $300 FPUC #2 (01/03/2020-03/14/2021)
Pay Now vs Pay Later

When you apply for Unemployment, you choose whether to have taxes withheld. Either way, you pay taxes. The only question is if your state’s Unemployment agency withholds it for you or you pay when you file.

The exact amount you will owe depends on many individual-specific circumstances during the entire year (how much you earned besides Unemployment, how many dependents you have, and other variables). Depending on circumstances, many people will actually owe less than 10% in federal taxes for Unemployment payments, or in fact nothing at all, while others may owe more than 10%.  If you have the 10% deducted and you owe less than that, you will get the difference as a refund. If you owe more, then you will need to pay more.

Being that Unemployment is considered “unearned income”, minors and dependents who received more than $1,100 in Unemployment need to file their own return.

1099-G Tax Form

Every January, each state’s Unemployment department should prepare a form 1099-G, which includes the total of all your Unemployment payments from the previous year. Whether or not you chose to withhold taxes, you need to include the 1099-G form in your tax return. Here is how to get the 1099-G form in NY.


PPP offers self-employed and 1099 workers two grants of 20% of their annual net income (totaling 40%). Businesses with payroll can get two grants of 2.5 months worth of annual salary (totaling 5 months).

There are no federal taxes on PPP.

Most states, including NY and NJ, are not taxing PPP.

EIDL Grant

EIDL Grant: of up to $10k for small businesses or self-employed/1099 workers. 

There are no federal taxes on the EIDL grant.

Most states, including NY and NJ, are not taxing the EIDL grant.


EIDL Loan of up to $150k at 3.75% interest (2.75% for non-profits) for small businesses or self-employed/1099 workers.

The EIDL loan needs to be paid back, so that’s definitely not taxable.

Stimulus Payments

Stimulus Checks for those who are income-eligible 
Round 1:  $1,200 per adult and $500 per child
Round 2: $600 per adult and $600 per child

Stimulus checks are not taxable.

If you did not yet get the full amount for either EIP #1 or EIP #2,  request the payments as part of your 2020 tax return.


FFCRA is Covid paid-leave of 2 weeks full pay (capped at $511/day) and 10 weeks at 2/3 pay (capped at $200 a day). Employees can get a maximum of $12,000 and Self-employed/1099 workers can get a maximum of $10,000.

  • Self-employed peopleGet the credit as a refund on your taxes. This is not taxed.
  • Employees: You were paid from your employer. It is considered wages and taxed as normal.
  • Employers: Receive a refund on the gross wages which were paid to employees. No taxes paid on the refund.

Earned Income Tax Credit (EITC)

Earned income credit (EIC) is a tax credit (max $6,660)for those who work and have earned income under $56,844.

Due to Covid, when you file your 2020 taxes, you can choose to use either your 2019 amounts or 2020 income amounts, whichever will get you a higher credit/refund.

Child Tax Credit (CTC)

Child Tax Credit is a $2,000 credit per child for those with a qualifying child under the age of 17 ( $1,400 per child is fully refundable even if no taxes are owed).

Due to Covid, when you file your 2020 taxes, you can choose to use either your 2019 amounts or 2020 income amounts, whichever will get you a higher credit/refund.

Flexible Spending Account (FSA)

Option to roll over balances from 2020 to 2021 (and balances from 2021 to 2022).

$250 Educator Expense Deduction

If you’re an eligible educator, you can deduct up to $250 ($500 if married filing jointly and both spouses are eligible educators, but not more than $250 for each spouse) for classroom supplies. You don’t have to itemize to take advantage of it and it also reduces your Adjusted Gross Income (AGI).

If you spent the $250 on Covid-related protective gear after March 12, 2020, that also counts towards the $250.

$300 Charitable Donations Deduction

Usually, charitable donation deductions are only helpful for those that itemize their deductions. Most people take the standard deduction and as such cannot deduct their charitable donations.

For 2020, even if you don’t itemize, you can still deduct up to $300 for donations. This also reduces your AGI. It’s $300 per tax return, so even if you file jointly it’s still $300. For 2021 it will be $600 for joint filers.

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  1. PLEASE CLARIFY AND UPDATE THE ARTICLE: you can only use your 2019 income to calculate your EITC if the 2019 earned income was HIGHER then your 2020 income.

    The purpose of this is to help low income people because unemployment income does not count as earned income for the EITC and there is a minimum amount of income needed to qualify.

    Again, you CANNOT use your 2019 earned income to calculate your 2020 earned income tax CREDIT if you earned LESS money in 2019.

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