Do I Need to Report My Stimulus Checks on My Tax Return?
Did you receive a stimulus check in 2020? Wondering if you need to report it as extra income on your 2020 tax return? The answer is no. In fact, it’s the opposite. You report how much you received as a stimulus check for both the one you received in April or May, 2020 as well as the stimulus check you received in January, 2021. If you did not receive any stimulus funds you report 0 and could receive a credit on your 2020 return if you qualify for either one of the stimulus funds.
Let’s break down the ins and outs of the stimulus checks, and how to report it on your tax return. Again, you do not need to report either stimulus check as income. You only need to report it to calculate if you are owed additional funds as a credit on your 2020 tax return.
The Recovery Rebate Credit
The novel coronavirus shuttered the doors of businesses across the globe. This led to mass layoffs at companies both big and small. The United States congress needed a way to help keep working class families stay afloat during these lean economic times. To do this, they passed the Recovery Rebate Credit in March of 2020. This rebate credit was issued via two payments in the second, and fourth quarter of 2020. These payments are known as Economic Impact Payments (EIP).
The amount of your Economic Impact Payment was based on your 2019 tax return. This means that your reported 2019 income determined the amount you would receive in your stimulus checks. The first round of EIPs were issued in the amount of $1,200 to every US adult. An additional $500 was issued for each dependent, up to a maximum of $2,400 for married couples. You should have received these payments in April or May of 2020.
The second round of EIPs consisted of $600 for every US adult, and an additional $600 for every dependent, up to a maximum payment of $1,200 for married couples. You should have received these funds in December, 2020 or January, 2021.
2019 High Income Earners
The Recovery Rebate Credits had stipulations. Individuals who earned more than $75,000 in 2019 received either a reduced amount EIP, or didn’t receive one at all. The same is true for married couples who reported a 2019 income higher than $150,000.
Do not report the stimulus check as other income or as earned income.
Other EIP Tax Credit Situations
Even if you received a full stimulus check, there are still certain situations that allow you to report your EIP as a tax credit.
If you had a baby in 2020, you now have a dependent that was not claimed on your 2019 tax return. This means that you likely did not receive the full amount in your stimulus check. You can report the missing amount as your tax credit. Just make sure you obtain the social security number for your newborn by the extended tax return deadline.
The second common EIP tax credit situation is for those who earned a high 2019 income, but were laid off or furloughed in 2020. If your reported taxable 2019 income caused you to miss out on the full amount of your stimulus check, you can claim this missing amount as a tax credit on your 2020 tax return.
Need Help Filing Your Tax Return?
Need some help filing your tax return? Want to make sure you claim the correct amount of your missing stimulus payments? At TMDL, we know how to make sure your tax return is handled correctly, ensuring that you receive the largest refund possible. Get in touch with us today to schedule your tax return consultation.