Top 10 Things You Need to Know About Your Stimulus Check
by Mariela Reiss, CPA
Ever since Congress passed the first round of stimulus checks in March of 2020 to help stimulate the economy and get people through the first days of Covid-19 lockdowns, the country has been waiting eagerly for a second round. On December 27, 2020, we got it. The Consolidated Appropriations Act of 2021 was signed into law.
Contained within that bill was the COVID-Related Tax Relief Act of 2020, which offered additional 2020 Economic Impact Payments (aka Recovery Rebate Credits or stimulus checks). And the IRS started rolling out these payments on December 29.
So what do you need to know about the new stimulus checks that are coming your way?
- Your stimulus check should be coming to your mailbox or bank account very soon…if it isn’t there already. The IRS started making direct deposit payments as early as December 29, 2020. And they began mailing paper checks on December 30. This second round will be paid in the same way the first round was. So if you got your stimulus check by direct deposit the first time around, check your bank balance. If you get your stimulus check by mail, keep an eye on your mailbox in the coming weeks; payments are scheduled to be mailed out by the end of January per the IRS website.
- You don’t have to do anything to get your money. Most taxpayers won’t have to do a thing to receive this next stimulus payment. If you received the first stimulus payment by direct deposit, you will receive this one by direct deposit. If you received the first stimulus payment by check (or debit card), you will receive this payment the same way. Taxpayers who did not get either payment but are eligible to receive them will be able to claim the payments (in the form of refundable tax credits) when they file their 2020 tax return in April.
- Your stimulus check…may not be an actual check. For those who don’t receive their payment by direct deposit, the payment may be coming to you in the form of a paper check or an Economic Impact Payment card. So if you get an envelope from the US Department of the Treasury containing a debit card with a Visa logo on the front and the name of MetaBank, N.A. on the back, don’t throw it away! You just got your stimulus.
- You can hop onto the IRS website to find out the status of your stimulus check. You can use the “Get My Economic Impact Payment” tool on the IRS website (https://www.irs.gov) to check the status of your stimulus payment. But the IRS is updating the tool as we speak; it was temporarily offline as of January 3. So if you can’t find the tool, try again in a few days.
- There should be less confusion over the amount of the check, this time around. In the first round, there were different amounts for taxpayers/spouses and qualifying dependents. This time around, the stimulus is a straight $600 for each taxpayer, spouse and qualifying child aged 16 or under. Period. So just count yourself, your spouse, and your qualifying children 16 and under, and multiply by $600. That’s how much your stimulus check will be.
- Taxpayers who made more in 2019 may not receive stimulus checks. Stimulus starts phasing out for taxpayers who make over a certain amount. So for single taxpayers who made over $75,000 or married filing joint who made over $150,000 in 2019, there may not be a stimulus check in the mail.
- Your stimulus check is (still) not taxable. Technically, the stimulus checks are refundable Recovery Rebate Credits, not taxable income. So you will not have to report the stimulus you received in 2020 as income on your 2020 tax return. Which is good news in a rough year!
- Even though the stimulus check isn’t taxable, you will still have to do some reporting of information on your 2020 tax return. As already mentioned, the stimulus payments are actually refundable tax credits. To make sure you received the full amount of your refundable credits for 2020, you’ll have to do some calculating on the 2020 tax return. But don’t worry: although you may find out you get more in refundable credits at tax time, you will never owe more tax because of the stimulus payments.
- If you don’t remember what you received from the IRS, don’t worry. They will remind you. It’s been a very long year, so you might not remember how much you got in stimulus payments in 2020 or 2021. But you should receive an IRS letter stating the amount you received. Keep this letter for your tax preparer. They will need this document to prepare your 2020 tax return.
- Finally, be on the alert for COVID-19 scams. Sadly, whenever there is money being issued by the government, there are scammers looking to take advantage of unsuspecting taxpayers. The IRS will never call, email or text you to ask you for your social security number, bank account or other personal information. If you receive a suspicious phone call, email or text, don’t open it and don’t answer any personal questions. Remember: the IRS already has your information. And if they don’t, you can still get your stimulus as a refundable tax credit when you file your tax return. So don’t fall for the scammers and keep your personal information safe.
Have more questions on how 2020 will impact your tax return? We are here to help! If your current firm is not helping you navigate the complexities of your tax situation, then reach out to us at [email protected], or meet with us here.