Do you have to pay taxes on stimulus checks? No, and here’s why

Tax season has rolled around once more, but this year many filers are contending with an unusual source of income: stimulus checks.

More than 150 million Americans received at least one stimulus check in 2020 to help blunt the blow of the pandemic—many received a $1,200 check early in the year, and a $600 check in December.

But now, many Americans might be concerned those checks could turn into a tax bill.

“We’re seeing a tremendous amount of questions and uncertainty from people this year around what different life changes or working or income changes mean [for] their taxes,” Andy Phillips, a director at the Tax Institute at H&R Block, tells Fortune. “A common question is, ‘What do the stimulus payments mean to my taxes?’”

To provide clarity and dispel misconceptions, Fortune set out to answer the biggest tax questions surrounding stimulus checks.

Do I need to pay taxes on my stimulus checks?

In short: no. Your stimulus checks are not taxable, and do not count as taxable income.

The checks are technically considered a refundable tax credit by the IRS, which basically means they were an advance of a 2020 tax credit.

If you received the full payments you were eligible for in 2020, “there’s really no impact on your tax return; you just kind of leave that blank and move on,” says Phillips. Stimulus checks won’t reduce your refund.

How do I know how much money I got from stimulus checks in 2020?

While many people qualified for the full $1,200 and $600 stimulus checks, for others, the amounts might be a little different. And if you’re wondering exactly how much you got in stimulus payments in 2020, Phillips points to a few places to look.

He says “the best place to start” is by looking at the IRS notice 1444-A (for the first round of payments) and 1444-B (for the second round of payments). “If you don’t have that, you can look at your bank records and get a pretty good idea, or you can log in or create an IRS account, and that information will be there,” says Phillips.

I didn’t receive my stimulus checks last year, or they were less than I was expecting. Can I still get one?

If you were eligible for a stimulus payment last year but did not receive it (or didn’t get the full amount you believe you were owed), you might be eligible to get those funds via the Recovery Rebate Credit.

Phillips says that since the “ultimate eligibility for the Recovery Rebate Credit is based upon the items on your 2020 tax return,” and the IRS used 2019 (or 2018) tax returns to determine eligibility, “they may have not had the information to determine you were eligible for an additional amount.” The good news is when you file your 2020 tax returns, you’ll be able to get those amounts (if eligible) either through a bigger refund or reducing your balance due, he says.

Here are a few reasons you may be owed a check, or more money than you received: You had a child in 2020 (the first stimulus round paid out $500 per qualifying dependent, while the second round paid out $600); you had a big change in income during 2020 (for example, you lost a job); or you became a new independent filer in 2020 who meets the qualifications.

If you believe you’re eligible, Phillips says you can complete the Recovery Rebate Credit Worksheet found in the Form 1040 instructions, which looks “at your income, the amount of payments you got as an advance, and then determine[s] if you should be eligible for any more,” he notes. Any extra stimulus money you qualify for should be reported on Line 30 of your tax return.

Per the IRS, you have to file a 2020 tax return “to claim the Recovery Rebate Credit, even if [you] don’t usually file a tax return.” The rebate credit is based on your 2020 information given to the IRS, instead of the 2018 or 2019 tax returns that were used for the prior two stimulus checks.

Do I have to file my 2020 taxes to get the $1,400 stimulus check?

Democratic leaders are actively trying to pass an economic aid bill including a $1,400 stimulus check. Drafts indicate the IRS would use the most recent tax filing you submitted, either 2019 or 2020.

So no, it’s unlikely you’d have to file your 2020 taxes before the checks are sent if you qualified for previous rounds.

Should I wait—or rush—to file my 2020 taxes?

The current draft of the bill suggests eligibility for the $1,400 checks will be based on taxpayers’ most recent tax filing submitted (2019 or 2020).

If that’s the case, Americans whose incomes fell in 2020 would be incentivized to file before the economic aid bill passes. Conversely, Americans whose incomes rose in 2020 might want to hold off—that way the IRS might use their 2019 tax filings to determine eligibility.

Sen. Ron Wyden has suggested the IRS will use the most recent tax filing on file, and that Americans should act accordingly. Earlier this month he tweeted: “Tax filing season starts February 12. By filing your taxes early, you’ll ensure your next relief payment will be based off of your most recent income. If you lost wages in 2020 as a result of this pandemic, file your taxes ASAP to ensure you get the help you need.”

Simply put, the decision to submit your 2020 tax return early could make or break whether you get the $1,400 check.

Those like Phillips caution that “in the vast majority of cases, it’s probably still in your best interest to go ahead and file. If you’re waiting on a tax refund and you need that money, you don’t want to delay filing in hopes of some potential future legislation,” he says. However, “if you know 2019 is not going to make you eligible, and you are ready to file 2020, that’s just one more catalyst to go ahead and file.”

Of course, this would only impact Americans whose incomes fall above or below the thresholds and cutoffs put forward by Congress. The House outlined plan would send full $1,400 direct payments to individuals earning up to $75,000, and a $2,800 check to couples filing jointly with incomes under $150,000. Adjusted gross income (AGI) above that level could still get reduced payments; however, the payments would phase out completely for single filers earning more than $100,000, and for couples filing together at $200,000.

When will the $1,400 stimulus checks pass?

House Speaker Nancy Pelosi has made it clear she wants the House to pass the package, including $1,400 checks, by the end of the month. A vote could come as early as Friday. Democrats hope to get the bill signed into law by President Joe Biden by March 14—the date when a slew of pandemic unemployment benefits are set to expire.

If the relief bill is signed into law by March 14, eligible Americans could get their check before the end of March.

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