What The Stimulus Checks Mean For Your Taxes
We’ve finally begun to receive our third stimulus check. Although it technically counts as a second check since the amount has been tied to the $600 check we received a few months ago. This makes it the $2000 amount that was originally promised to all of us. However, now that we’ve gotten this free money from the government, many question how it will get paid back and its effects on our taxes. We’ve been told that we will not have to pay it back, according to the IRS. However, that could change, especially if some of the factors in your life have been altered over the past year. We have some details and information about what checks mean for you and how these situations can mean you owe money.
Stimulus Check As A Tax Credit
Many have assumed that the stimulus payment will count towards your income and therefore generate a larger tax bill. Or even have it reduce a future tax refund next year. Luckily neither of these options are true about the stimulus check.
Technically, the check is a tax credit for 2021.
We know that a tax deduction is a great thing, but a tax credit is even better! Tax credits reduce your tax bill dollar for dollar. This basically means that if you owed $1,500 in your federal income tax and then receive a $1,000 tax credit, the bill reduces to $500. However, the stimulus acts more as a refundable tax credit. This is why we can get the checks almost immediately and not wait until next year’s income tax season to get the money. The great thing about this form of tax credit is that if you did not receive it for whatever reason, it can get added to your income tax refund and not have any major effect.
Why The Third Stimulus Check Become Complicated
We’re now at round three of our stimulus checks. Although, this time, we’re getting checks during tax season. As many of us who have already filed taxes have found out that we can receive any missing stimulus checks on this coming refund. We also became aware that the IRS was not accepting any tax forms until February 12th to make adjustments for the second stimulus checks. Also, take into consideration that the third round of checks is based on your 2020 tax return.
Why Would I Owe Money From My Stimulus?
There are noted incidents where people actually need to pay back their stimulus. Although, the number of people that do need to do this is few amongst the many. Say if you made more money in 2020 than 2019, or if there was a change in family status or dependents. These problems occurred more with our first two checks than the most recent third check. For this new check, if your income exceeds $80,000 a year, don’t expect a deposit or check in the mail. Although, if you do get money, the IRS will be expecting to get paid back. There is a small loophole, though. If you did make more in 2020 than you did in 2019 and get a check before filing taxes, you can keep it.
Other Reasons To Return Your Stimulus
Due to the number of people getting checks and the way life can change before systems can process things, you may still need to return the check. Some reasons include:
- Receiving a check for a deceased family member
- You do not have a Social Security number.
- You file as a “non-resident alien” and do not have a spouse that is a U.S. citizen, OR you file as a noncitizen on federal taxes.
- Your AGI (adjusted gross income) exceeds $80,000 a year.
- You are already claimed as a dependent on someone’s tax return.
Where Is My Check?
If you’re still in question on the status of your check, the IRS has made it simple for you to stay up to date with its progress on the Get My Payment tool.
CRRC Makes Things Simple
To help you understand your business and personal taxes, we have services to assist you. You can view all of our tax resources on our website. Let us know how we can help you with understanding your taxes and the process involved. Call us today or visit our site to start making your tax life simpler than ever!