Key point: Stimulus payments are a vital lifeline and, as such, the federal government will not tax Americans for recieving them. Here are the details of how taxes and the law will work in regards to those checks.
The $1,400 checks that are currently being distributed as part of the American Rescue Plan, which passed Congress and was signed by President Biden in March, have been rolling out to Americans over the course of the last month. With April 15 coming up—even though the filing deadline has been extended to May 17—many people are curious how getting this payment will affect their taxes.
The good news is they won’t.
Per CNBC, none of the stimulus checks that have arrived in any of the three stimulus packages to pass since the start of the pandemic are taxable.
“No, the payment is not income and taxpayers will not owe tax on it,” the IRS said of the stimulus payments. “The payment will not reduce a taxpayer's refund or increase the amount they owe when they file their 2020 tax return next year. A payment also will not affect income for purposes of determining eligibility for federal government assistance or benefit programs.
Those who did accidentally listed their stimulus money as income for 2020 will need to get a refund.
“If you accidentally listed your checks as income, you will pay more in taxes when filing your return and will eventually have to receive a refund from the IRS. There’s no guarantee the IRS will catch your mistake for you when processing your 2020 return,” Mark Steber, chief tax information officer at Jackson Hewitt, told CNBC.
There is also something called “plus-up” payments, which are what happens in situations in which taxpayers’ economic picture changed between 2019 and 2020 and are now eligible for larger payments. The first two stimulus payments were based on 2019 tax returns, but some payments are arriving in 2021, after the completion of the 2020 tax year.
“This batch includes the first of ongoing supplemental payments for people who earlier in March received payments based on their 2019 tax returns but are eligible for a new or larger payment based on their recently processed 2020 tax returns,” the IRS said of the payments, which are rolling out throughout this month.
Many Americans have questions about the stimulus checks that are being distributed as part of the Recovery Act.
The stimulus checks are scheduled to be distributed to some veterans who have received VA assistance on April 14. The government and some private entities have been warning about a variety of scams that have surfaced in connection with the stimulus payments, including fake checks, dubious phone calls, and other attempts by criminals to steal people’s checks.
Debt collectors are allowed to garnish the stimulus checks, although some Senators, as well as state lawmakers, have pushed for such garnishments to be outlawed.
Stephen Silver, a technology writer for the National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver. This first appeared earlier and is being reposted due to reader interest.