Yes, You May Need to Report Your Stimulus Check on Your Taxes—Here's Why
Uncle Sam might've given you the wrong amount of money.
Thanks to the coronavirus (COVID-19) pandemic, if you're a U.S. citizen, you likely received a stimulus check (or two) from the government. Where the first check was $1,200 across the board, a second lesser check of $600 was doled out to some individuals. Either way, no matter which check (or checks) you received, there's a caveat: You might have to report it on your taxes.
Since this is a first-time occurrence for just about everyone—receiving a pandemic relief check, that is—knowing how to approach your taxes as they relate to the check(s) isn't exactly common knowledge. In fact, a Credit Karma survey found that nearly 50% of those surveyed misunderstood the tax credit. For that reason, we chatted with a few tax experts for everything you need to know come Monday, May 17th (aka tax day). Check it out, below.
Do you have to claim stimulus checks on taxes?
TL;DR: Our experts say "yes."
Here's why: Stimulus checks aren't taxable (because they're not considered income) but according to WalletHub analyst Jill Gonzalez, they might affect your return. "According to the IRS, the stimulus payments will not reduce your refund, or increase the amount you owe when you file your taxes," she explains. "However, if you are eligible but you haven't received your stimulus money, it will come in the form of a tax credit. This means the stimulus amount will be added to your refund." On your taxes, this will be referred to as the Recovery Rebate Credit (more on that later).
How to report a stimulus check on a 2020 tax return:
By now, you should have received IRS notices for the stimulus checks you received. They're titled Notice 1444 (for the first check) and Notice 1444-B (for the second). While everyone who received a check should have obtained these forms, they're only really useful for people who didn't qualify for the full amount that they should have received.
"If you didn't receive an IRS notice confirming the stimulus checks, you should be able to find it in your federal tax account, on the IRS website," explains Gonzalez. (You can also call the individual tax helpline at 800-829-1040.) "If you don't have an account, you can create one on there. Keep in mind, you'll need to have tax and financial information on hand to set up the account," she adds.
If you didn't receive a stimulus check or didn't receive the full amount you qualified for, Credit Karma chief people officer Colleen McCreary says that you can claim the Recovery Rebate Credit. When you apply for this credit, McCreary says that you will either receive a larger refund or, if you owe money, you'll owe less as a result. That's because whatever money you should have received as part of your stimulus will be applied to your taxes. To determine exactly how much you should have received, you can use the calculator on the IRS website.
Something to keep in mind is that if you lost your job or had a baby during 2020, there's a chance that you could qualify for different tax breaks and credits—including a larger stimulus check(s). As such, it's helpful to talk with a tax professional to determine exactly what you qualify for.
If you received the correct amount, do you still need to report it?
Again, yes, especially if you believe you received the wrong amount. As Gonzalez points out, reporting your stimulus checks helps the IRS ensure that you've been paid the proper amount.
"Since the amount of your stimulus checks is linked to your tax return, reporting it will allow the IRS to determine whether you received more or less than you should have," she explains, noting that even if you received more money, you likely will not have to return it, for it's based on your filings for the previous tax year. "But if you got less than you should have, the difference will be reflected on your return."
So, while reporting your check will only change the outcome of your return if you should have received more money than you did on your stimulus check(s), Gonzalez says it doesn't hurt to file.