“When you get something for nothing, you just haven’t been billed for it yet.” – Franklin P. Jones
Tax season has officially opened and the IRS has linked stimulus funds to your 2020 tax returns. If you did not receive the full stimulus amount you can claim it on your 2020 tax return through something called the Recovery Rebate Credit.
Let’s answer some of the most common questions that people have regarding stimulus and their tax returns.
Will I pay taxes on the stimulus checks? No. The RRC calculation determines how much stimulus you should have received, but you will not pay taxes on any stimulus received.
What stimulus information do I need to file my taxes? You need to know the amount of stimulus you received for Economic Impact Payment 1 and EIP 2.
EIP 1 payments were sent out beginning in April 2020. The amount was $1,200 ($2,400 if married filing jointly) plus $500 for each qualifying child – subject to income limitations based on your AGI.
You should have received IRS Notice 1444 telling you how much you received. If you did not receive Notice 1444, you can go to your IRS account or create one at IRS.gov/Account to determine the amount. If none of that works for you, check the deposits at your bank and look for the words “IRS Treas” in the description field.
EIP 2 payments were sent out beginning in December 2020. The amount was $600 ($1,200 if married filing jointly) plus $600 for each qualifying child – subject to income limitations based on your AGI. You should have received IRS Notice 1444-B telling you how much you received.
If you did not receive the full amounts of either EIP, you may qualify for the RRC.
Will I have to pay the stimulus back if I don’t qualify?
If you received more stimulus than you would have based on your 2020 adjusted gross income, the answer is no. You do not have to return any of the stimulus you received. The IRS answered this in their response to question J3 on the IRS Economic Impact Payment site which can be found at https://www.irs.gov/coronavirus/economic-impact-payment-information-center.
If you received a payment for someone who died in 2019, the IRS wants you to return the entire payment unless the payment was made to joint filers and one spouse is still living. In that case, the IRS asks you to return half the payment, but not more than $1,200.
You can see the IRS response at https://www.irs.gov/newsroom/returning-an-economic-impact-payment#. You can find the details on how to return the money in the response to questions I1 and I2 at the IRS Economic Impact Payment Information Center website listed here.
If you received a payment for someone who died in 2020 or 2021, or if you are the spouse of someone who died in 2020 or 2021, that person is eligible for the Recovery Rebate Credit. The IRS originally stated that you must return any stimulus funds that were received after death. They have changed their stance.
You can claim any stimulus not received by filling out the RRC worksheet. The IRS gave this answer in response to question B12 on the IRS Recovery Rebate Q&A page that can be found at https://www.irs.gov/newsroom/recovery-rebate-credit-frequently-asked-questions.
I hope this helps you get ready to file your tax return this season and ensures you get all the stimulus you were supposed to!
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Curt Fowler is president of Fowler & Company and director at Fowler, Holley, Rambo & Stalvey. He is dedicated to helping leaders build great organizations and better lives for themselves and the people they lead.
Curt and the team at FHRS help leaders build great companies through Virtual CFO, strategy, tax and accounting services.
Curt is a syndicated business writer, keynote speaker, and business advisor. He has an MBA in strategy and entrepreneurship from the Kellogg School, is a CPA, and a pretty good guy as defined by his wife and four children (No. 5 coming June 2021!).