Stimulus checks aren’t taxable income. So you don’t have to worry about being taxed for the first or second stimulus payments. According to the IRS:

No, the Payment is not included in your gross income. Therefore, you will not include the Payment in your taxable income on your Federal income tax return or pay income tax on your Payment. It will not reduce your refund or increase the amount you owe when you file your 2020 or 2021 Federal income tax return.

A Payment also will not affect your income for purposes of determining eligibility for federal government assistance or benefit programs.

Important information for 2021 Tax Year

Advance Child Tax Credit payments. Congress last year increased the amount of this credit and, in a twist, paid half of the credit in advance. Now, households that received advance payments need to compare what they received in 2021 with what they can properly claim on their 2021 return.

The IRS has sent out Letter 6419, containing key information such as the amounts paid and number of qualifying children. Taxpayers also may check key information using the CTC Update Portal at irs.gov.

Eligible taxpayers who received advance payments should file a 2021 return to obtain the second half of the credit. People who didn't receive advance payments can claim the full credit by filing a return, including those who don't normally need to file. But taxpayers who got more than they were entitled to receive might need to repay the difference.

Child and Dependent Care Credit. For 2021, the American Rescue Plan Act has made changes to the credit for child and dependent care expenses reported on Form 2441.

• The credit is fully refundable for taxpayers meeting residency requirements

• The amount of qualifying expenses has been increased to:

  • $8,000 (previously $3,000) for one qualifying child or up to

  • $16,000 (previously $6,000) for two or more qualifying children

• The maximum credit has increased to 50% of the taxpayer's employment-related expenses:

  • $4,000 maximum credit for taxpayers with one qualifying child

  • $8,000 maximum credit for taxpayers with two or more qualifying children

• The income phaseout amounts and credit have been increased to the following:

  • 50% of expenses - Begins to phase out when the taxpayer's income exceeds $125,000

    • The credit percentage is reduced by 1% for each $2,000 the taxpayer's AGI exceeds $125,000, The credit is reduced to 20% of expenses when the taxpayer's AGI reaches $183,000

  • 20% of expenses - For taxpayers with AGI between $183,001 and $438,000

Economic Impact Payments. The government approved three rounds of pandemic stimulus payments — two in 2020 and the third last year. The IRS in late January will begin issuing Letter 6475 to people who received the third payment. Eligible individuals who didn't receive payment can still claim it, but they will need to file a return to do so.

The CARES Act

• Allows for an additional above the line deduction for charitable contributions up to $300 (Not available for non-cash contributions).

• Form 8994 - Refundable tax credit for employers who provide paid leave to employees due to coronavirus reasons.

• Form 7202 - Refundable tax credit for self employed individuals who were unable to work or telework due to COVID-19.

• Self-employment and payroll taxes can be deferred.

  • Due to be paid back by Dec 31 of 2021 and 2022.

• NOL - Net operating losses for business are now allowed to be carried back five years (previously only allowed to be carried forward).