What To Know About Stimulus Payments And Your Taxes
As the COVID-19 pandemic swept across the country and closed businesses in its wake, the government issued multiple rounds of stimulus relief and other payments designed to help American households weather the storm.
In 2021, that relief included a third round of economic impact payments, advanced payments on the child tax credit and enhanced unemployment benefits. As we head into the tax filing season, you may now be wondering if and how those payments will affect your tax bill.
Keep reading for answers to common questions.
Do I Need to Pay Taxes on Stimulus Payments?
The good news is that stimulus money received last year won’t increase tax bills this spring.
“Don’t report stimulus checks as income,” says Jeremiah Barlow, head of family wealth services for financial firm Mercer Advisors. If you do, you could end up paying more taxes unnecessarily. “Some people might enter it as income, and the IRS is unlikely to catch that for you,” according to Barlow.
However, you don’t need to take your tax professional’s word for it. The IRS instructions for this year’s 1040 form state, in part: “Any economic impact payments you received are not taxable for federal income tax purposes.”
What Is the Recovery Rebate Credit?
Those who didn’t receive a payment last year or who had a change in their situation, such as the addition of a child, can complete a worksheet to determine whether they are eligible to claim the credit on their 2021 tax return.
I Get Ssi Should I Spend The Stimulus Money Within A Year What Can I Spend It On
Spend down your CARES Act EIP money before 12 months have passed since receiving the payment. You are not limited in what you can spend the money on. You can spend down on whatever you wish, including on gifts and charitable contributions. If you dont spend it within 12 months, the Social Security Administration will count the money as a resource.
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How Will The Irs Know Where To Send My Payment
The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.
For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The economic impact payment will be deposited directly into the same banking account reflected on the return filed.
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What Do Tax Topic 152 Tax Topic 151 And Irs Error Messages Mean
Although the IRS’ Where’s My Refund tool will generally show one of the three main statuses — Received, Approved or Sent — for your refund, there are a wide variety of messages and notices that some users may see.
One of the most common is Tax Topic 152, a generic message indicating that you’re likely getting a refund, but it hasn’t been approved or sent yet. The notice simply links out to an informational topic page on the IRS FAQ website explaining the types and timing of tax refunds.
During the 2022 tax season, many Reddit tax filers who filed early received the Tax Topic 152 notice from the Where’s My Refund tool accompanied by a worrisome message: “We apologize, but your return processing has been delayed beyond the normal time frame. You can continue to check back here for the most up to date information regarding your refund. We understand your tax refund is very important and we are working to process your return as quickly as possible.”
The purported delay could be an automated message designed for taxpayers claiming the child tax credit or earned income tax credit. Due to additional fraud protection steps, the earliest filers with those credits can receive their refunds will be March 1. Several Reddit users commented that the message eventually cleared and they received notifications their refunds were sent.
How To Secure A Timely Refund
Delaying the traditional start of tax season may help reduce confusion among taxpayers who havent received stimulus payments they are eligible for, but it also means a longer wait for Americans who rely on annual tax refund payments and file early in the season, or who wont receive any stimulus until filing their returns.
The IRS says nine out of 10 taxpayers will receive their refund within 21 days of filing if they do so electronically using direct deposit and there are no issues with the return.
Thats three weeks that people are out that money, says Dan Herron, CPA, founder of Elemental Wealth Advisors in San Luis Obispo, California. But many who rely on an annual refund check, need that money because they bank on that to pay for medical expenses, or major purchases, or just surviving at this point. Thats frustrating.
Despite the late start, there are a few ways to ensure you receive your tax refund, including any stimulus payment youre eligible for using the Recovery Rebate Credit, as quickly as possible.
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Do I Need To File My Taxes To Get A Stimulus Payment
If you are required to file a tax return, the IRS will use information from your most recent filed tax return to issue your stimulus payment.
Here are the reasons you are required to file a tax return for tax year 2020:
- Taxpayers who earn income more than the IRS income filing threshold .
*Note: If you are single and 65+, thresholds are bumped up to $14,050 for 65+ or blind. If you are married filing jointly, 65+ thresholds are $13,700 for 65+ or blind.
- Self-Employed whose net income is $400 or more since they need to pay self-employment taxes on income of $400 or more
- Dependents with unearned income more than $1,100 and earned income more than $12,400
- You received an advance payment of the health coverage tax credit
- You owe taxes on an IRA or Health Savings Account
If are not required to file, you can use the TurboTax free Stimulus Registration Product to provide the IRS information needed so that you can receive a stimulus payment.
How To Claim Your Missing $600 Or $1200 Payments
The stimulus checks are generally advance payments of a tax credit.
The 2020 tax returns now offer a section where you can claim the recovery rebate credit for either the first $1,200 stimulus check or the second $600 payment if that money is due to you line 30 of Forms 1040 or 1040-SR.
On that part of the return, filers can start with the amount of stimulus money they already received and calculate any more funds which they are due. That can be done either through a worksheet provided with the tax form or through tax preparation software.
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When Should I Get My Payment
The IRS was given hard and fast deadlines to send the two rounds of Economic Impact Payments out to American families. The first round of payments had to be sent out by . The second round had to be sent out by .
What this means: If you have not received the first or second round of payments yet, then you will not be getting them in advance. The good news is that you can still do something to get these payments. Read below.
Still Didnt Get Your Stimulus Checks File A 2020 Tax Return For A Rebate Credit Even If You Dont Owe Taxes
If you are eligible, you can still get a missing Economic Impact Payment through the Recovery Rebate Credit.
Lets talk stimulus. First, lets talk about someone who normally does not file an income tax return, then someone who does. Then, well discuss what you can do if your stimulus payment got lost.
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Recovery Rebate Credits For 2020 And 2021
To provide financial relief during pandemic, many Americans received three Economic Impact Payments in 2020 and 2021. The third payment, which began rolling out in March 2021, served as an advance payment of the 2021 Recovery Rebate Credit.
If you didnt receive the latest EIP, you could be eligible to receive the following as part of your tax refund:
- $1,400 for a single individual
- $2,800 for a married couple filing jointly
If you received the EIP in 2021, you should have an IRS letter Notice 1444-C showing the amount you received so you can record it on your tax return.
- If you didnt receive the most recent EIP, you can claim it when you file your 2021 tax return.
If you didnt receive the first or second EIPs, even though youre eligible based on your income, you need to file or amend your Tax Year 2020 returns to receive those payments.
Stimulus Checks And Your Taxes: What To Know When You File Your 2020 Tax Return
Whether you get a stimulus check or not relies heavily on your taxes, even if you don’t file at all. With tax season 2020 in full swing, here’s what you need to know.
Taxes and your stimulus check have a special bond this year.
There are people who do look forward to tax season each year — those expecting a refund, for example. This year, however, you’ve got several good reasons to fie your federal tax returns as soon as possible. Aside from the possible refund, your federal tax returns are linked to recovering your first two stimulus payments if you never received them. Even better, a third stimulus check is also tied to your taxes this year. Even if you’re a nonfiler, someone who doesn’t file taxes, this is the case for you, too.
This tax season will probably be the most complicated we’ve had to deal with due to new adjustments made to figures in stimulus checks and additional unemployment assistance. We’ll explain how your tax returns and stimulus checks are linked, how your dependents figure in and whether the stimulus payment is considered taxable income. Also, here’s when a third stimulus check could arrive, how the IRS calculates the money you’ll get and if you could expect to receive a bigger or smaller check than before — or none at all.
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Irs Letter 6475 Notice 1444
You’ll need to know the total amount of your third stimulus check payment and any “plus up” payments actually paid to claim the recovery rebate tax credit on your 2021 tax return. You can get this information from a few different sources. First, you should have received Notice 1444-C from the IRS shortly after receiving your third stimulus payment. If you received a joint payment with your spouse, the notice shows the total amount of the payment. If you’re married but file separate 2021 tax returns, each spouse must enter half of the payment amount shown on Notice 1444-C. People who received a plus-up payment should have received a separate Notice 1444-C after your payment was sent. Save Notice 1444-C with your other tax records.
The IRS is also mailed Letter 6475 in January. This letter confirms the total amount of the third stimulus check and any plus-up payments you received for the 2021 tax year. Again, if you received a joint payment with your spouse, the letter shows the total amount of payments. If you file separate 2021 tax returns, each spouse must enter half of the amount shown on Letter 6475. Save this letter, too.
What If My Spouse Or Ex
If you did not get all or some portion of your Economic Impact Payments you can file a 2020 tax return and claim these amounts on line 30 of the form. The IRS is referring to this as the recovery rebate and will allow you to claim any of the EIPs that you did not get in advance. You may get a denial letter from the IRS, but that is the opportunity to reply and explain your situation to the IRS.
Vermonters with a low income can contact us for help at the Vermont Low-Income Taxpayer Clinic by filling out our form or calling 1-800-889-2047.
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Who Will Receive The Stimulus Check Automatically Without Taking Additional Steps
Most eligible U.S. taxpayers will automatically receive their Economic Impact Payments including:
- Individuals who filed a federal income tax for 2018 or 2019
- Individuals who receive Social Security retirement, survivors, or Social Security Disability Insurance benefits
- Individuals who receive Railroad Retirement benefits
This Tax Season Is Your Last Chance To Get Your $1400 Stimulus Check
This tax season is that last chance filers have to get any stimulus money they may be missing from the third round of payments that was disbursed to most people last year.
If you haven’t gotten your $1,400 payment for yourself or your dependents or got less than you qualify for you will need to claim the 2021 Recovery Rebate Credit on your tax return. This is the final opportunity you will have to get your 2021 stimulus money, unless you file an amended 2021 tax return later on.
Most people have received all of the stimulus money they are eligible for, according to the IRS. But there are a few reasons you may be able to claim the credit:
Again, you must meet the income eligibility requirements in order to receive the money for yourself or your dependents.
Let’s say you’re a single filer who had an adjusted gross income of $80,000 in 2020. Technically, you would not have qualified for a stimulus check at all. But if your AGI fell to $75,000 in 2021, then you’d be able to claim the full $1,400.
Alternatively, if your AGI was $80,000 in 2021, contributing $5,000 to a traditional IRA which you can still do for 2021 would lower your taxable income enough to reach the $75,000 AGI eligibility limit for the full stimulus payment. You would need to do that before filing your 2021 tax return to reap the benefits.
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I See An Irs Treas 310 Transaction Listed On My Bank Statement What Does It Mean
If you receive your tax refund by direct deposit, you may see IRS TREAS 310 listed for the transaction. The 310 code simply identifies the transaction as a refund from a filed tax return in the form of an electronic payment . You may also see TAX REF in the description field for a refund.
If you see a 449 instead of 310, it means your refund has been offset for delinquent debt.
You Havent Received Your Second Stimulus Payment Yet
Many people will receive stimulus payments by direct deposit, according to the IRS. If you paid 2019 federal taxes via direct debit or received a tax refund by direct deposit, you will likely receive your second stimulus payment the same way. The majority of these payments have already been issued. If the IRS does not have your correct, up-to-date banking information, youll receive payment by mail or debit card .
Social Security or other beneficiaries who use Direct Express cards and received the first round of stimulus on that card can expect the same this time. Otherwise, payment will come by mail.
Generally, you can expect to receive your payment in the same form you received the first stimulus payment under the CARES Act in early 2020. But thats not the case for everyone. If the IRS is unable to make a direct deposit, your payment may be sent by mail. And if your first stimulus payment arrived via paper check, you could receive a debit card this time, and vice versa.
The best way to track how and when youll receive your stimulus payment is with the IRS Get My Payment tool. This tool can tell you when your payment was sent and whether itll arrive via direct deposit or mail.
And while Jan. 15 is the IRS deadline, you may not actually receive payment by that date. After your payment reports as mailed on the Get My Payment tracker, it may take up to three or four weeks to receive the check or debit card, the agency says.
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Your Bank Account Number
When you file your taxes, make sure you use your current banking information if you would like your payment through direct deposit.
Typically, youll receive this payment using the refund option you select on your tax return. If you received an advanced refund through your tax service provider or paid your tax preparation fees using your refund, youll receive your payment by check in the mail.
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Claim A Recovery Rebate Credit
When filing the 2020 return, the individual will claim the Recovery Rebate Credit to receive the first two stimulus payments.
Those who earned less than $72,000 in 2020 can use IRS Free File to file a basic return. They will also qualify for free tax help via community programs the IRS has established. The agency suggests finding help on its Free Tax Return Preparation site or by calling 800-906-9887.
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