Stimulus checks and your 2020 taxes: What you need to know when you file

The IRS kicked off the 2020 tax season on Feb. 12, which means you can now officially file your federal tax returns and receive a tax refund, if the IRS owes you money for an overpayment. But this year, the IRS is on the hook for more than just tax refunds. Congress has tied your federal tax returns to your first two stimulus payments and may link the third stimulus check to your 2020 returns. And all that goes for those whom the IRS categorizes as nonfilers, too.

That means, with your tax returns this year, you can claim any missing stimulus check money from the first two checks as a Recovery Rebate Credit on your tax form. You can also set up direct deposit when you file with the IRS to make sure to get money the IRS owes you as quickly as possible. And if Congress does decide to base your third payment on your 2020 taxes, it could be in your best interests to file your taxes as soon as you can so the IRS has a snapshot of your most recent financial situation.

Navigating this tax season is complicated no matter how you look at it, with new COVID-19-related rules in addition to stimulus checks. We explain how tax returns and your stimulus checks go together, how your dependents figure in, whether the payment counts as taxable income and everything else you need to know, including when your third stimulus check could arrive, how the IRS calculates the money you’re owed and if you should expect to receive a bigger or smaller check than before — or none at all.

How could my 2020 taxes affect the amount of a third stimulus check?

This month, lawmakers are deciding that question. So far, it looks like Congress could base a third stimulus check on your 2019 or 2020 taxes, whichever the IRS has on file at the time it processes your payment. If your situation changed dramatically between the two years, you could potentially get the full amount, even if the IRS bases the check it sends on your 2019 taxes. You may need to wait till 2022, however, to claim the difference on next year’s taxes. Here’s everything to know about how tax season could affect your third check.

The timeline for sending the third stimulus check is expected to fall within tax season — April 15 is the tax-filing due date — which complicates matters quite a bit, especially since the IRS is already combining makeup stimulus money with your tax refund this year (more below).

I’m missing money from the first two checks. How can I file for a Recovery Rebate Credit?

The December stimulus bill set a Jan. 15 cutoff for the IRS and US Treasury to send the second stimulus payment to bank accounts and through the mail as a paper check or EIP card. Unless the IRS mailed your check right at the deadline or your payment is caught up in a direct deposit holdup with tax preparers, you’ll need to claim money from the $600 stimulus check as a Recovery Rebate Credit on 2020 Form 1040 or Form 1040-SR when you file your federal tax returns this year. 

You can also claim money the IRS owes you from the first round of stimulus checks, authorized last spring — millions are owed a catch-up payment for child dependents.

To help work out whether you’re missing a payment, and for how much, the IRS provides a Recovery Rebate Credit Worksheet. You’ll need the IRS’ calculated amount from the letter the agency sent you, called Notice 1444 for the first payment and Notice 1444-B for the second payment.

When do I need to claim a stimulus credit on my taxes?

According to the IRS, you’ll be able to claim a missing payment on your taxes now with any payments going out after you file. You can prepare your taxes now — through the IRS’ Free File tax preparation service, if you qualify to use it — or through a tax-preparation service. The tax-filing deadline is April 15 this year, but you can file a tax extension if you can’t make the deadline.

What if I wait until the April 15 tax deadline or file for an extension?

April 15 is the due date for all 2020 tax returns, but filing your taxes sooner will not only potentially speed up delivery of any tax refund you might collect but also position you to get any missing stimulus money weeks or even months faster. We made a handy comparison chart here that looks at the timing.

Filing for a tax extension won’t postpone your having to pay taxes you may owe. Those will still be due by April 15; otherwise, you accrue interest on the amount, which you’ll eventually have to pay on top of your income taxes. And you of course are delaying receiving your stimulus payment.

If I file my taxes, will it speed up or slow down my third stimulus payment?

That depends. Since a third stimulus payment is being worked out and we can only guess when the next stimulus payment round will come, one potential way to receive it first is to sign up for direct deposit with the IRS, if you haven’t already.

What if I’m a nonfiler and don’t typically file my taxes?

According to the IRS, tax nonfilers also need to file Form 1040 or Form 1040-SR to claim the Recovery Rebate Credit. The IRS says anyone with an income of $72,000 or less can file a federal tax return electronically for free through the IRS Free File service.

Do I have to pay taxes on any of the stimulus check money I received?

No, a stimulus payment doesn’t count as income so you won’t owe tax on it, the IRS has said. 

I didn’t file my taxes in 2019. Can I still get a stimulus payment?

If you weren’t required to file a 2019 tax return because you were below income limits or you receive federal benefits such as Social Security (including through SSI and SSDI programs), you may still qualify for a payment. Up to 9 million people who fell into this nonfilers category were owed a first stimulus payment as of last fall.

Though many people in this category should have received their second payment automatically, if the IRS doesn’t send your money by the start of tax-filing season, you’ll need to file a federal tax return this year to claim your missing payment as a Recovery Rebate Credit, the Tax Foundation said.

How exactly is my stimulus payment total related to my tax return?

The IRS uses the adjusted gross income, or AGI, from your 2019 federal tax return to calculate how much of the $600 payment and how much of your future payment your household will receive. (We explain here how the IRS works out your total payment.) Your AGI may be a different figure from your annual salary or your take-home pay, since it’s based on a variety of factors. The IRS may use your AGI on your 2020 return to calculate your third payment.

How are taxes, stimulus checks and dependents related?

For the second check, you could receive up to a $600 payment for each dependent under age 17 whom you claim on your taxes. The definition was narrower than for dependents who’d be eligible for certain credits under tax law, including children 17 and older, dependents of any age with disabilities and older adult relatives. 

The third stimulus check under Biden’s $1.9 trillion proposal of a $1,400 payment could be sent to a more widely defined group. (Here’s what we know about its timeline.)

Am I eligible for a stimulus payment if I lost my job or got a new one since I filed my taxes last year?

If your financial situation changed after you filed your 2019 tax return — for example, if you received less income — you can claim that additional amount on your 2020 tax return when you file this year.

Will the total stimulus payment amount I received affect how much I’ll owe on this year’s taxes?

If you got a payment last year, it won’t reduce your tax refund or increase what you owe when you file your 2020 tax return this year. The payment also doesn’t count as income for purposes of determining if you’re eligible for federal government assistance or benefit programs.

Could my 2019 tax returns help get my missing stimulus payment sooner?

Depending on your personal tax situation, the Recovery Rebate Credit for your missing stimulus money would either reduce the total amount you owe to the IRS or give you a larger tax refund.

If the IRS has your direct deposit information from a previous federal tax return, the agency will attempt to deposit your check in the bank account you provided. If you receive your tax refund by check in the mail, however, or if the IRS info or your bank information is out of date, the agency will send your refund in the mail. The IRS didn’t accept direct deposit information for the $600 check, but you should consider registering a new direct deposit account with your 2020 tax filing.

Will I have to give my stimulus check back to the IRS if I qualify for less with next year’s taxes?

You won’t be required to pay back a stimulus payment if, based on your 2020 tax returns, you no longer qualify for the amount you received. Here’s when the IRS expects you to return full or partial stimulus check payments.

Will the IRS garnish my stimulus check money to cover other expenses I owe, like federal taxes?

For the second check, the IRS won’t reduce your stimulus payment to cover any past-due child support you owe, and debt collectors can’t garnish your payment either.

However, the protections from the Consolidated Appropriations Act that prevented the IRS from garnishing your stimulus check for unpaid taxes do not apply to people who are claiming their missing stimulus checks on their tax returns. 

“If you are an eligible individual who has not yet received your full EIP and you have certain outstanding debts, some or all of your unpaid stimulus payment will be withheld to offset those debts,” the Taxpayer Advocate Service said in a blog post. The IRS is looking into this issue.

For more, here’s everything you need to know about stimulus checks.