If you received a stimulus check, AKA Economic Impact Payment, or should have, then you are probably wondering how this is going to impact your 2020 taxes when you file.
Luckily, your stimulus check is a tax credit, so it doesn’t increase your taxes at all!
What the IRS did was send you a credit that you would have received on your tax return when you filed in advance.
Here is a comparison that you may be more familiar with: You may receive child tax credits if you have eligible dependents, but you have to wait until you file your tax returns before you may receive those credits back, which could help increase your chances of a tax refund.
The big difference is that the stimulus checks or Economic Impact Credits were paid to you in advance.
You still have to report the amounts you received for each round of stimulus checks. That amount can be found on a form that you probably threw out called a 1444 (first round) and 1444-b (second round).
If you received a stimulus check but do not have your 1444’s, there are two easy ways to find this information:
- Find the deposit amount through your online banking or using a statement.
- Create/login at: IRS.gov/account
If you didn’t receive the full amount of your stimulus check for any reason, it’s possible that you may still be eligible for the remaining amount of your Economic Impact credit when you file your 2020 tax return. Based on your income and filing status, the IRS will cross-reference any amount you should have received versus the amount you actually received. If the difference is positive, then you will see credits applied to your tax return, reducing your tax liability or increasing your tax refund.
If you received more than you should have based on your income increase in 2020 from what you had reported on your 2019 tax return, there is no repayment required! The only exception to this would be if the IRS incorrectly sent out a stimulus check based on your 2019 return. You may have heard about the gentlemen who received $8.2 Million back in the spring. In this very rare scenario, you would have to return the portion you received in error.
Knowing the amount of your stimulus checks is very important to correctly complete your tax return and avoiding costly penalties. This could happen if you fail to report your stimulus, and as a result, you receive duplicate economic impact credits. Not only would you be required to pay that incorrect amount back, but fees and penalties could apply.
A new round of stimulus checks may soon be on the way. If so, it will be a new credit that you will report on your 2021 tax return next spring — you will not need to include it or wait for it before filing your 2020 tax return.
Lucas Casarez is a husband, father of three amazing kids, and a Certified Financial Planner™. He founded Level Up Financial Planning, one of the few fee-only financial planners in Northern Colorado. The mission of Level Up Financial Planning is to guide his clients in taking their financial confidence to the next level.
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