Newsletter: How the COVID-19 relief bill may affect your taxes
Good morning. I’m Rachel Schnalzer, the L.A. Times Business section’s audience engagement editor. President Biden signed the $1.9-trillion coronavirus relief package last week, which means $1,400 direct payments are en route to many Americans, in addition to a slew of other benefits.
My colleague Sarah D. Wire recently broke down ways the package could affect people’s finances. One big takeaway: There are tax implications, so take a look at these points even if you’ve already filed your tax return.
File quickly if you made less money in 2020 — or had a baby
The Internal Revenue Service is expected to distribute the stimulus money — which does not count as taxable income — within a few weeks via direct deposit, debit cards and paper checks.
Your most recent income tax return will be used to determine how much money you will receive. If you already filed your 2020 return and it’s been processed before your stimulus money is sent, your stimulus payment will be based on your 2020 income. Otherwise, your pre-pandemic income will be used to determine the amount you receive.
Long story short: If you made less money last year than the year before, you should file your taxes as soon as possible to maximize your stimulus payment. But if you made more in 2020 than you did in 2019, you may want to take your time filing your return.
If you received unemployment benefits last year, good news
Unemployment benefits are typically taxable income, but the Senate made up to $10,200 in unemployment benefits free of federal tax for households whose incomes last year were below $150,000.
If you already filed your return and paid undue federal tax on unemployment benefits you received last year, you can get the money back by filing an amended return.
Benefits for parents expand
Parents will receive $1,400 for each child on their tax returns as part of the relief package. This includes adult children such as college students if they’re claimed as dependents. If you’re unsure whether you can claim your child as a dependent, try this questionnaire from the IRS.
In addition, the existing federal child tax credit has been expanded up to $3,600 per child for all but the wealthiest households in the 2021 tax year.
The Child and Dependent Care Tax Credit has also been expanded to up to $4,000 for the child-care expenses of one child and up to $8,000 for two or more children.
Curious about other ways the COVID-19 relief package may affect you? Wire has you covered. Want to know other ways the pandemic might affect your tax return? Check this previous edition of our newsletter.
How COVID-19 changed L.A. businesses
To commemorate the one-year anniversary of the coronavirus shutdown and the current wave of reopenings, the Business section — along with Times photographers, videographers and designers — teamed up to illustrate how much has changed for businesses in Los Angeles.
We created an interactive story that spans the length of Pico Boulevard from the beach to downtown L.A. Some of the businesses cut hours, services and staff or closed altogether. But many have survived beyond their expectations.
The full story will be published later this week, but we can’t resist giving a little preview. Here are a few of the businesses it includes:
McCabe’s Guitar Shop
McCabe’s Guitar Shop has been largely quiet since the initial shutdown. “Concerts went to zero. Lessons dropped to 5% of what it was,” said Walt McGraw, who has been running the 63-year-old shop with his wife, Nora. “We’re seeing a lot of repair business from people who are stuck at home and want to play. Consignments are up a lot.”
McCabe’s was helped by a $150,000 federal Paycheck Protection Program loan and is preparing for the future by installing plexiglass and partitions. Next on the list: an outdoor concert space.
Headmaster Barber Shop
Business has slowed considerably for Headmaster Barber Shop, where manager Charles Boateng says he feels lucky to do even six haircuts in a day.
The other barbers who rent seats at the shop have similarly seen their business cut in half during the pandemic. Many are relying on unemployment benefits to make it through.
Dana Accesorios sells formalwear for milestone events such as quinceañeras, baptisms and weddings. The shop is open but losing money, putting a strain on the owners.
Laura Manto and her husband have used up their savings, a PPP loan and stimulus checks to keep Dana Accesorios afloat. But they haven’t lost hope — Manto expects business to pick up as churches and schools reopen.
Apple Pan had been a cash-only business since 1947. But after the shutdown, the burger mainstay began taking credit cards as it adjusted to its temporary status as a takeout-only restaurant. New outdoor seating for up to 78 people also helped it weather the pandemic.
“We’re doing OK, you know? We’re making it work,” co-owner Shelli Azoff said. “We’re still in the black, but the margins are much less.”
Consider subscribing to the Los Angeles Times
Your support helps us deliver the news that matters most. Become a subscriber.
Other stories you may find helpful
◆ The pandemic has told us a lot about American society but left many questions unanswered. Columnist Michael Hiltzik breaks down lessons from the last year.
◆ Two Ralphs supermarkets and a Food 4 Less grocery store will close in Los Angeles, Suhauna Hussain and Dakota Smith report. The chains’ owner, Kroger, blames the city’s hazard pay requirement.
◆ In a hurry to save for retirement? Read this advice from certified financial planner Liz Weston.
◆ California’s economy will recover from the pandemic faster than the nation’s as a whole, a new forecast says. Margot Roosevelt explains predictions made by UCLA economists.
◆ Clearview AI uses your online photos to instantly identify you. Johana Bhuiyan reports on a lawsuit that alleges the company violates Californians’ privacy.
One more thing
Columnist David Lazarus reported last spring that some car insurers were ignoring COVID-19 stay-at-home orders by imposing rates based on the assumption that people were driving as much as they had before the pandemic.
In response to the column, state Insurance Commissioner Ricardo Lara reviewed the insurance companies’ actions and ordered insurers to return $1.75 billion to policyholders.
Those refunds didn’t all happen as ordered. Last week, Lara announced that some car insurers shortchanged California policyholders by hundreds of millions of dollars. Read the full story here.
Have a question about work, business or finances during the COVID-19 pandemic, or tips for coping that you’d like to share? Send us an email at email@example.com, and we may include it in a future newsletter.