Will stimulus checks impact your taxes?
The top of a form 1040 individual income tax return for 2005 is seen atop a stack on the same at the Des Plaines Public Library March 23, 2006 in Des Plaines, Illinois. (Photo by Tim Boyle/Getty Images)
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WASHINGTON (NEXSTAR) — While many taxpayers have already received their second stimulus check, many are asking if stimulus payments are considered taxable income and will impact their 2020 taxes.
Videos and reports have circulated claiming that Americans will have to pay back the relief checks on next year’s taxes. Those reports are false.
Both the U.S. Treasury Department and Internal Revenue Service say these social media reports are misunderstanding language in the $2.2 trillion economic rescue package that resulted in the one-time payments. Americans won’t be required to pay that money back come next year, the Treasury said.
Because the stimulus payments in 2020 and 2021 are considered tax credits, the payments are not considered as income. Also, according to the IRS, the payments are not an advance on your tax refund.
The bottom line? The payments will not impact your tax owed for 2020 and will not reduce your possible refund.
If you did not receive your coronavirus stimulus check despite being eligible for it, you have the opportunity to claim it when you file your taxes for 2020.
However, not everyone received their checks as intended. People who didn’t file a tax return in 2018 or 2019 and didn’t send the IRS their information before the 2020 deadline may not have received a check.
If you didn’t receive a stimulus check, or the payment was less than what you should have received, you are still eligible to receive that money in the form of a Recovery Rebate Credit.
The IRS encourages everyone – especially those who believe they received too little – to keep the Notice 1444, sent out after the payments, for their records.
The IRS says that payments to Americans as part of the CARES Act are not taxable for federal income tax purposes. For those people who received a partial stimulus payment, that amount will be deducted from any Recovery Rebate Credit.
Can my payment be seized if I owe money?
It can happen but not always.
If you owe back child support, the relief money can be taken to satisfy that debt.
If your bank account is overdrawn and the payment is deposited there, the bank can keep the deposit to satisfy the amount it’s due, just as it would any normal deposit. However, a number of banks — including Bank of America, JPMorgan Chase, Citibank and Wells Fargo— have decided the relief payment will not have to go to negative balances or fees, according to a report by the New York Times.
There also is nothing in the CARES Act, the massive relief program that includes the payments, that protects them from private debt collectors. A debt collector must have a court judgment that allows them to come after that money, unless a state has opted to put a law in place to protect it.
Still waiting on your second stimulus check?
A number of taxpayers who use tax preparation services, such as H&R Block and TurboTax, say their second relief payments were sent to the incorrect bank account, forcing them to wait longer for their money.
The IRS and the Treasury Department began issuing the Economic Impact Payments last week. The payment is $600 for each eligible adult and dependent for people earning up to $75,000, or $150,000 for married couples filing jointly. Those earning more than that are eligible for a reduced payment.
The IRS said that direct deposit payments would take several days to post to individual accounts but funds were largely available on Monday. Some payments are also being sent via paper check or debit cards during the month of January.
Be aware
Additionally, the IRS is urging people to be on the lookout for any scams related to the economic impact payments.
The IRS will not call, text, email or contact people via social media asking for personal or bank account information ever. It also warns taxpayers to watch out for emails with attachments or links claiming to have special information about economic impact payments or refunds.
The Associated Press contributed to this story.