Why Americans Are Confused About Whether They Owe Taxes On Their Stimulus Payments
In March 2020, former President Donald Trump signed a $2 trillion stimulus package, known as the Coronavirus Aid, Relief and Economy Security Act. Trump signed a second relief $900 billion stimulus package into law in December 2020. Both stimulus packages provided direct payments from the federal government to help Americans weather the economic effects of the pandemic.
But with these stimulus payments also came a lot of confusionwould these checks be taxed? Were they just a temporary allowance that would be clawed back the next year?
While the Internal Revenue Service has provided guidance that taxpayers would not need to add the stimulus payment to their gross income, or pay taxes on their payments, the IRS has not done a great job of keeping Americans informed. In 2020, the IRS answered only 24 million calls out of 100 million on its toll-free telephone lines due to limited resources during the pandemic, and many Americans still had questions about their own situation after reading the IRS guidance.
Holly Reid, a certified public accountant and financial educator in Atlanta, provided live Q& A sessions shortly after the passage of the CARES Act. Her viewers had a lot of questions about how the payments would work, and Reid recalls a member of her Facebook group asking whether the stimulus payment was actually a loan.
The Latest On $1400 Stimulus Checks
This tax season, the government is also issuing a third tranche of third stimulus checks for up to $1,400 per individual, plus $1,400 per eligible dependent.
Last week, the IRS and other agencies said about 127 million checks have been sent to date, for a total of approximately $325 billion.
Those $1,400 payments are generally based on 2019 or 2020 tax returns, whichever was most recently filed and processed by the IRS. Those who used the IRS non-filer tool last year should also automatically get their payments.
There are also advantages to filing a 2020 return in order to receive the $1,400 payment, according to the IRS.
If your income dropped from 2019 to 2020, you could be eligible for a larger payment. The IRS has said it may potentially send follow-on payments to those people after their 2020 tax returns are processed.
Filing a 2020 tax return also lets you update your direct deposit information.
This tax season, non-filers are also required to file a tax return in order to get their payment, provided they have not already submitted their information to the government.
Of note, people who receive federal benefits such as Social Security, Supplemental Security Income, Railroad Retirement Board and Veterans Affairs will generally receive their stimulus checks automatically, though there have been delays in processing some of those payments.
How Much Should I Have Received
The first economic impact payment was worth $1,200 per adult earning up to $75,000 in 2019 and $500 per child under age 17. The second was valued at $600 per adult earning up to $75,000 and $600 per child. After those income limits, the payments phase out.
There are many calculators you can use to estimate how much money you should have received total. Additionally, the IRS is including a Recovery Rebate Credit Worksheet in the instructions for Form 1040.
If you received the proper payment amounts for each check, then you don’t need to do anything on your tax return.
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Stimulus Checks: Recently Deceased
Q. I received a stimulus check for a deceased relative. What do I do?A. It depends when your loved one passed. For the first and second payments, individuals who died before January 1, 2020 are not eligible for payments. Individuals who died in 2020 are not eligible for the third stimulus check while anyone who died after December 31, 2020 may be eligible for the recovery rebate credit on their 2021 tax return.
During 2020, the IRS asked for stimulus checks/payments sent to ineligible deceased persons be returned. If the payment was made to joint filers, then youd only need to return the decedents portion. The IRS outlines instructions for how to return the payment on their website.
What If I Haven’t Gotten Last Year’s Stimulus Checks
If you haven’t gotten one or either of the stimulus checks from 2020, you’ll have to file for a Recovery Rebate Credit when you do your taxes this year in order to get the money you are owed.
The Recovery Rebate Credit is a tax credit against your 2020 income tax. The IRS explains that taxpayers who claim this credit will either see an increase in their tax refund or a decrease in the amount of the taxes they owe.
Say, hypothetically, that you have a $2,000 tax bill this year but are still owed the full $1,800 from the two 2020 stimulus checks. You will only owe $200 due to the tax credit’s offset.
Alternatively, if you expect to receive a tax refund, the total amount of your refund may be higher this year when stimulus money is factored in.
To get an idea of what to expect, refer to IRS Notice 1444 and IRS Notice 1444-B. These are the letters you should have received in the mail detailing the amount of your Economic Impact Payment.
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What Is A Stimulus Payment
Back in March of 2020, federal lawmakers enacted an economic stimulus package as a way to support families during the challenging economic times caused by the coronavirus pandemic. That stimulus bill was approved for $2 trillion enough to provide most American families with direct payments of up to $1,200 per taxpayer.
Those stimulus checks are also referred to as economic impact payments or recovery rebates. Technically, they served as an advanced tax credit on your 2020 income taxes. Recipients received them by either direct deposit to bank accounts or debit cards, or through a mailed check.
This was followed by a second stimulus check in January 2021 and a third stimulus check in March 2021.
Stimulus Check Update: Here’s What To Know If You’re Claiming A Stimulus Check On Your Taxes
by Christy Bieber | Updated July 25, 2021 – First published on April 13, 2021
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Claiming your stimulus check on your tax return? Here’s what you need to know.
In March, President Joe Biden signed the American Rescue Plan Act into law and authorized the distribution of a third stimulus check. The IRS has distributed more than 156 million of these payments and is continuing to steadily deposit money into people’s bank accounts or mail out checks.
If you haven’t yet received your third check, you can use the IRS’s Get My Payment tool to determine when your money will arrive.
If you didn’t receive either the first or second check, though, the IRS will no longer send the payment to you automatically. You are going to have to claim it by filing your 2020 taxes if you didn’t receive your money. Here’s what you should know about this process.
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How Could My 2020 Taxes Affect The Amount Of A Third Stimulus Check I Could Get
The amount of your third stimulus check is based on your 2019 or 2020 taxes, whichever the IRS has on file at the time it determines your payment. If your situation changed dramatically between the two years, you could potentially get the full amount, even if the IRS bases the check it sends on your 2019 taxes. You may need to wait till 2022, however, to claim the difference on next year’s taxes. Here’s everything to know about how tax season could affect your third check.
The timeline for sending the third stimulus check is merging with tax season — April 15 is the tax-filing due date — which complicates matters quite a bit, especially since the IRS is already combining makeup stimulus money with your tax refund this year .
How To Make Sure You Receive Your Credits As Soon As Possible
The Recovery Rebate Credit worksheet requires that you know the specific amounts you were supposed to receive, according to the IRS. By doing the investigation and calculation work in advance, youll most likely end up getting your stimulus check and tax refund faster.
To get it correct, that cannot be overemphasized, Steber says. These Recovery Rebate Credits are real cash, and they sent out hundreds of millions in the two tranches. If you did in fact receive it and forget about it, it could add weeks to your tax return timeline.
Your tax refund will be passed more quickly and safely if you electronically file and provide a direct deposit, the IRS says.
Typically, the IRS is good at sending out refunds within a couple of weeks within electronically filing, Bronnenkant says.
Not included in 2020s Recovery Rebate Credit is a third stimulus payment worth $1,400 or more, distributed to Americans beginning in mid-March after President Joe Biden signed the $1.9 trillion American Rescue Plan. Taxpayers will most likely have to wait until 2021 to claim those missing relief payments, Jaeger says.
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Stimulus Checks: No Taxable Income Or Address
Q. Im a single person that has a valid SSN, but I do not file a tax return because I do not have any taxable income. What should I do if I didnt receive any stimulus money?
A. For the first two rounds of economic impact payments, the taxpayer will need to file a 2020 tax return with the IRS and claim the recovery rebate credit. Eligible taxpayers who did not receive the maximum amount of advance payments and taxpayers who missed receiving the first or second stimulus payments altogether can claim a credit on their tax return for the amount they qualified for but did not receive as an advance payment. For example, a single taxpayer who was eligible for but did not receive either economic impact payment would be eligible to claim a recovery rebate credit in the amount of $1,800 .
If this same eligible taxpayer did not receive the third economic impact payment, they should receive that from the IRS after their 2020 tax return is processed. Once the IRS processes the taxpayers 2020 tax return, the IRS will use the information from the 2020 tax return to determine eligibility for the third round of payments. In this case, if the IRS determines the taxpayer is eligible for the full third economic impact payment and no payment has been made to that taxpayer, the IRS will issue an additional $1,400 to that individual. The FAQs available on this IRS webpage help explain the process someone should follow in this situation to complete their tax return.
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The Third Stimulus Check: Who Gets It And How To Claim It
The American Rescue Plan is a $1.9 trillion relief package to help alleviate the hardship that millions of Americans feel right now including checks directly to families and individuals like you. Here are the details about the stimulus checks. Visit our other blog post for more details about other benefits.
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What You Need To Know About Your 2021 Stimulus Check
OVERVIEW
In response to the challenges presented by Coronavirus , the government is taking several actions to bolster the economy, such as offering expanded unemployment, student loan relief, sending stimulus checks and more.
For information on the third coronavirus relief package, please visit our American Rescue Plan: What Does it Mean for You and a Third Stimulus Check blog post.
As Coronavirus continues to disrupt the U.S. economy, many have turned to the federal government for hope. To help provide relief in these unprecedented times, the Coronavirus Aid, Relief and Economic Security Act a $2 trillion stimulus package to help individuals, families and businesses was signed into law.
This relief will be taking many shapes over the coming months, such as:
- Widespread stimulus legislation, including efforts such as stimulus checks, mortgage relief for those adversely impacted by the economic slowdown, student loan interest relief, and more.
- The Federal Reserve has announced actions to stabilize and backstop the economy.
But how do some of these efforts work and who will they directly impact? Let’s take a look at the stimulus checks, how they work, who qualifies, how do you get one, and how your taxes will be affected.
How Are The Stimulus Check And My Taxes Related
The government agency in charge of making sure you get your stimulus check is the Internal Revenue Service, which also issues federal tax refunds and collects payments. Talk of the IRS may cause a feeling of dread, especially if you tend to owe money at tax time, but there’s nothing to worry about here.
The stimulus money is not considered taxable income. The check will not increase the amount you owe when you file your 2020 federal tax return and will not decrease your refund for the 2020 tax year. The IRS and your tax filings are only involved because the government needs to verify your income to issue your stimulus payment.
The federal government uses your federal tax return for 2018 or 2019 to calculate the amount of your stimulus check. If you already filed your 2019 return, that information will be the foundation for your stimulus payment. If you haven’t filed a 2019 return, the IRS will rely on information from your 2018 return to determine your stimulus amount.
But what if your income has changed dramatically in recent years, and you worry it may complicate matters? Here’s how that works:
- If your income is lower in 2020 than it was 2018 or 2019, you could be eligible for a stimulus check based on your 2020 income. That payment would come after you file your federal return for the 2020 tax year.
- If your income goes up in 2020 compared with 2018 or 2019, you won’t be forced to pay back the stimulus money and won’t lose any of your 2019 or 2020 tax refund.
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How To Claim A Recovery Rebate Credit On Your 2020 Taxes
To claim the Recovery Rebate Credit on your taxes, you’ll need to:
- Verify which stimulus payments you’re missing.
- Confirm the amount you’re missing from each stimulus round.
- Enter the amount you’re owed for the Recovery Rebate Credit.
- Deduct the amount you’re owed from your total tax debt and send the IRS a payment for the difference. If your taxes come to less than the stimulus money, wait for the IRS to issue you a refund.
Of course, the Recovery Rebate Credit may be only one of several tax credits you’re entitled to. Check out this 2020 tax planning guide — it’s loaded with tips that could help you snag different tax breaks.
When Will You Receive Your Stimulus Payment After You File For A Recovery Rebate Credit
The IRS started processing 2020 tax returns on Feb. 12 but extended the tax deadline to May 17 and focused on sending stimulus checks instead. If you filed for a Recovery Rebate Credit as part of a 2020 tax form and submitted it in February or early March, you can check the status of your tax return and refund to see if it’s been processed. It isn’t certain what the IRS’ revised timeline is for processing tax returns submitted in mid-March and beyond.
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No You Dont Need To Pay Back Your Stimulus Check
U.S. President Donald Trump departs after speaking during the daily briefing on the novel coronavirus, which causes COVID-19.
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The second round of direct checks authorized in the almost $900 billion coronavirus relief package are not a carbon copy of the first checks, starting with the halved, $600 payout size.
But many rules about stimulus checks 2.0 remain the same and that means some theories about the government money that were untrue in the spring are just as untrue now.
Those are canards like some supposed obligation to pay backthe money or the capacity of some random cold-caller to get your moneyquicker .
Federal regulators are already trying to prevent possible confusion. Congress passed the relief bill on Monday and President Donald Trump gave into his misgivings over the relatively modest sign of the stimulus compared to the first relief measures announced in March, among other concerns. Last Sunday, he signed the massive pandemic-aid bill, averting a government shutdown in the process.
But the Federal Trade Commission put out a reminder on Tuesday that nobody will ever call you asking for money to quicken your access to the cash.
At the same time, the new set of stimulus checks do havesome new rules for certain scenarios, like for people who are behind on childsupport or married to a non-citizen.
Treasury Secretary Steven Mnuchin said Monday these economic impact payments could start arriving in bank accounts next week.
