When COVID stimulus payments were first issued, there was a great deal of confusion regarding whether or not those payments were simply an advance on your tax refund. This was not the case, and any stimulus amount you received will not impact how much you receive or how much you owe on your taxes. However, many people do still have questions regarding how to file their taxes this year with their COVID stimulus income. Here’s what you need to know.
When COVID stimulus payments were first issued, there was a great deal of confusion regarding whether or not those payments were simply an advance on your tax refund. This was not the case, and any stimulus amount you received will not impact how much you receive or how much you owe on your taxes. However, many people do still have questions regarding how to file their taxes this year with their COVID stimulus income. Here’s what you need to know.
Reporting Your Stimulus Income
As non-taxable income, your COVID stimulus check doesn’t actually need to be reported to the IRS—at least, in most cases. If you received the maximum payment amount ($1,200 per filer and $500 per dependent child), then you shouldn’t need to report your stimulus payment. Simple, right? However, that changes a little if you believe you were underpaid on your government-issued check.
What If You Were Underpaid?
The amount you received for your stimulus payment was based on your 2019 tax return (or your 2018 return, if you were still working on filing your return for 2019). The IRS simply assumed that your income would roughly the same, and issued a payment based on that income. If your individual income was under $75,000 (or under $150,000, if filing jointly), then you received the full $1,200 per filer. If you made more than this, the payments were reduced by $5 per every $100 over that threshold until it was phased out completely.
So, if your 2018 or 2019 income was over the above-mentioned income thresholds, you would have received less than the full stimulus amount. But many people experienced a reduction of income in 2020 due to job loss and business closures. This means that you might have qualified for more. Filing your 2020 return is your chance to get the rest of that stimulus check.
There is an additional worksheet for tax returns this year that is exclusively for those who did not receive the full stimulus amount. You should have also received Notice 1444 in the mail after getting your payment, which shows the total you received. This worksheet and notice are all you need to get the rest of your stimulus payment. Simply fill out the form and submit it with Notice 1444 and the rest of your tax return. The additional amount you are owed will be applied to your return, either reducing what you owe in taxes or being added to your refund.
What If You Had a Child?
Another way in which some people may have been underpaid in their stimulus checks is if they had a child in 2020. You should qualify for the $500 credit for your newborn or adopted child, regardless of when in 2020 they were born. As above, you simply need to fill out the new worksheet and submit Notice 1444 with your return to get the additional $500.
What If You Were Overpaid?
We’ve discussed what to do if your income was lower this year and you were underpaid in your stimulus amount as a result. But what if the opposite is true? What if your 2019/2018 income was below the income threshold to receive the full amount, but your 2020 income was over that threshold. Will you need to pay back any excess stimulus funds that you shouldn’t have received?
You’ll be happy to know that the answer to this is no. There is no provision in the laws surrounding these stimulus checks for repayment of excess funds. Whether you made more in 2020 or had a child turn 17 (thereby no longer qualifying for the $500 child credit), those extra funds are yours to keep.
Getting Help with Your New Forms
For most taxpayers, the COVID stimulus checks won’t impact how you file your taxes. However, if you were underpaid and need to fill out the new tax worksheet to get the full amount you qualified for, we can help. Contact us today and we’ll handle all of the paperwork for you. We understand that new tax forms can be confusing, and at the end of a stressful year, we want to take as much stress off your shoulders as we can.
Give us a call to schedule your appointment today. We’ll discuss your taxes, COVID payments, and any other relevant information we need to ensure that you get the full amount you were due for your stimulus checks. And, while we’re add it, we’ll ensure that you get every deduction you qualify for too, so that you can get the best results on your tax return possible.