Stimulus checks won't be taxed, but unemployment benefits will be

An arranged photograph of a United States Federal Government Coronavirus stimulus check, also known as the 'Economic Impact Payment' in Silver Spring, Maryland on May 24, 2020. By Katie Lobosco, CNN

(CNN) -- The federal government has sent billions of dollars directly to Americans to help them cope with the economic fallout of the pandemic, but now that tax season is approaching, some people could find they owe some of the money back.

It depends on the type of benefit. The two rounds of direct stimulus payments that were sent to millions of Americans are tax-free. But the special pandemic unemployment benefits are treated like income and could increase your 2020 tax bill if money hasn't already been withheld for taxes.

But some people might actually receive more stimulus money when they file their 2020 tax returns. Because stimulus checks were calculated using 2018 or 2019 income, those who lost their job in 2020 or otherwise saw their income fall from the year before could be due extra cash -- which they can claim on their return.

Here's what you need to know:

Stimulus checks are tax free

More than 160 million Americans received a stimulus payment worth up to $1,200, or double for couples, last year. A second round of payments began going out in January, worth up to $600 per individual, including children younger than 17.

The amounts are calculated on a sliding scale and start phasing out for individuals with adjusted gross incomes of more than $75,000, heads of household who earn more than $112,500, and married couples filing jointly earning more than $150,000.

The money isn't taxed, because the payments were technically an advance on a 2020 tax credit.

You could be due more stimulus money

The 2020 tax return will allow people to claim more money if they didn't receive the full amount they were due.

The stimulus payments were based on either 2018 or 2019 income. That means people who experienced a reduction in pay or lost their job during the pandemic are likely owed more money. (Those whose income increased in 2020 will not have to pay back any money, though.)

The Internal Revenue Service is adding a Recovery Rebate Credit Worksheet to the 2020 tax return forms to help taxpayers determine if they are eligible for more money.

Those who haven't gotten their second check because they changed their bank account or address since the first one was sent can also claim the money on their tax return.

What to do if you didn't get a stimulus payment

There are an estimated 8 million people who may have missed out on the stimulus payments altogether because they aren't normally required to file taxes and the Internal Revenue Service had no way of reaching them. An online portal that allowed them to input their bank account information is not longer available -- but they can file a 2020 return to receive the money.

President Joe Biden has asked the Treasury Department to take more aggressive action to reach these people.

Are more stimulus checks on the way?

Biden is calling on Congress to approve another round of $1,400 payments, as part of a sweeping $1.9 trillion relief plan that would also extend unemployment benefits, provide more money for small businesses, and reinstate emergency paid leave.

There is support for another round of checks from lawmakers in both parties, but it's not certain Biden has all the votes he needs. Democratic Sen. Joe Manchin of West Virginia has said he would prefer additional payments to be more targeted, to make sure the money goes to those hit the hardest and excluding people who may not need the money.

Congress could take steps to consider Biden's economic relief package as soon as next week.

Tax is owed on unemployment benefits

Unlike the stimulus payments, there is tax on unemployment benefits.

Congress has increased weekly payments by $300 through mid-March, on top of state benefits. Last year, the unemployed received a weekly boost of $600 for four months. Lawmakers also expanded unemployment benefits to more Americans, including the self-employed, independent contractors, and gig workers.

Like state unemployment benefits, the federal payments are subject to income tax. Some people may have chosen to withhold taxes from the benefit when they enrolled for unemployment with their state agency, but others may owe the full tax amount when they file their 2020 return.

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