How To Best Use Your Stimulus Money
If you’ve been waiting for your stimulus check for this long, you might already have plans for your tax refund. Taking care of overdue bills, high-interest credit card balances and immediate needs like food and shelter should be your first priority when deciding what to do with the money.
But if you have all your basic needs covered and feel secure in your job, there are additional ways you might want to use your tax refund.
This could be a good time to start your emergency fund. A high-yield savings account that earns a better interest rate than the national 0.05% average could help you stretch your money a little further and save more for future needs.
The Vio Bank High Yield Online Savings Account offers one of the highest APY rates for high-yield savings accounts right now . There is a minimum $100 deposit required to open an account, which is low enough that you could use a portion of your tax refund and still have money left over for other expenses.
There are no monthly charges to open a Vio savings account, as long as you opt to go paperless.
Annual Percentage Yield
None, if you opt for paperless statements
Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D
Excessive transactions fee
Will I Have To Return A Stimulus Payment If I Earned More In 2021
For last years payment, only single taxpayers with adjusted gross incomes at or below $75,000 and married couples filing jointly with adjusted gross incomes at or below $150,000 were eligible for the full amount. To determine eligibility, the government used previous years tax return data.
Since the stimulus payments were actually an advance on the recovery rebate credit, some people may worry they will need to return the money if their 2021 income is above the eligibility limits. Fortunately, that shouldn’t be a concern.
According to a fact sheet from the IRS that was last updated on Dec. 31, 2021, the law doesn’t require you to pay back any excess payments based on the information reported on your 2020 tax returns.
How Will Stimulus Payments Affect Taxes
As part of economic legislation aimed at mitigating the impact of the coronavirus, millions of individuals and families were eligible to receive stimulus payments, also referred to as economic impact payments by the Internal Revenue Service. The federal government sent out two stimulus payments in 2020, and one in 2021. Many people wonder if those payments are taxable or otherwise affect their taxes.
Also Check: What Is A Plus Up Stimulus Payment
Do You Have To Repay Your Irs Stimulus Money
But one of the most asked questions is whether or not US citizens will have to pay the money back. And to that end we have good news the answer is no.
Similar to the previous two rounds of relief funding, the latest stimulus check is basically just an advanced payment of the Recovery Rebate tax credit for the 2021 tax year. As a result, the money will not be included as part of your taxable income.
In fact, you wont be required to repay any relief funding you receive when filing your 2021 taxes. That remains the case even if your third stimulus payment is greater than your 2021 credit.
And if your stimulus happens to be less than what your 2021 credit is worth, then youll receive the difference when you file your 2021 return next year. Its essentially a win-win situation.
Meanwhile, the IRS and Treasury Department are hard at work to disperse the payments electronically to Americans. But its hard to say exactly when everyone will get their payments. Most, of course, will be deposited electronically. However, some will be sent in the mail either as a paper check or a pre-paid debit card.
The payments will be delivered automatically to taxpayers even as the IRS continues delivering regular tax refunds, IRS Commissioner Chuck Rettig said in a statement.
There is also a new tool for those who are interested in tracking your stimulus payment online. The IRS will be launching a new Get My Payment website on Monday, March 15.
What If I Owe Child Support Payments Back Taxes Money To Creditors Or Debt Collectors Or Federal Or State Debt
Both the first and second stimulus check cannot be reduced to pay any federal or state debts. Unlike the first stimulus check, your second stimulus check cannot be reduced if you owe past-due child support payments and is protected from garnishment by creditors and debt collectors.
If you use direct deposit and owe your bank overdraft fees, the bank may deduct these from your payment.
If you are claiming the payments as part of your 2020 tax refund , the payments are no longer protected from past-due child support payments, creditor and debt collectors, and other federal or state debt that you owe . In other words, if you receive your first and second stimulus checks as part of your tax refund instead of direct checks, it may be reduced.
Also Check: When Is The 4th Stimulus Check Coming Out
What If The Irs Still Hasn’t Processed Your 2019 Taxes
Due to pandemic-related delays, the IRS is still working its way through a backlog of paper tax returns from 2019. As of the end of January 2021, there were 6.7 million individual income tax returns for 2019 that had yet to be processed, according to the agency. These processing delays could be due to a number of things, including a mistake, missing information, or suspected identity theft or fraud. If the IRS contacts you for more information, you should get a letter. Resolving the problem then depends on how quickly and accurately you get back to the agency.
However, the new bill specifies that a third stimulus check will be based on your 2019 or 2020 tax return — not your 2018 one. The bill says: “On the basis of information available to the Secretary shall, on the basis of such information, determine the advance refund amount with respect to such individual.”
If your 2019 tax return is still being processed, the best thing to do right now is to file your 2020 return electronically as soon as you can, according to , a senior fellow at the Urban-Brookings Tax Policy Center. But if the holdup in processing your 2019 return is due to a problem that also occurs on your 2020 return, your return may get slowed down — which could delay your payment, Holtzblatt said.
All Third Economic Impact Payments Issued Parents Of Children Born In 2021 Guardians And Other Eligible People Who Did Not Receive All Of Their Third
IR-2022-19, January 26, 2022
WASHINGTON The Internal Revenue Service announced today that all third-round Economic Impact Payments have been issued and reminds people how to claim any remaining stimulus payment they’re entitled to on their 2021 income tax return as part of the 2021 Recovery Rebate Credit.
Parents of a child born in 2021 or parents and guardians who added a new qualifying child to their family in 2021 did not receive a third-round Economic Impact Payment for that child and may be eligible to receive up to $1,400 for the child by claiming the Recovery Rebate Credit.
While some payments of the Economic Impact Payments from 2021 may still be in the mail, including, supplemental payments for people who earlier this year 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 is no longer issuing payments as required by law. Through December 31, the IRS issued more than 175 million third-round payments totaling over $400 billion to individuals and families across the country while simultaneously managing an extended filing season in 2021.
The American Rescue Plan Act of 2021, signed into law on March 11, 2021, authorized a third round of Economic Impact Payments and required them to be issued by December 31, 2021. The IRS began issuing these payments on March 12, 2021 and continued through the end of the year.
Also Check: When Will The Next Stimulus Check Come
Are Stimulus Checks Considered Taxable Or Untaxed Income For Title Iv Purposes Including Pj
Please rate this Q& A on how helpful this guidance is to you. Thank you!
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This AskRegs Knowledgebase Q& A was updated on May 4, 2021 to include U.S. Department of Education confirmation of guidance previously provided by NASFAA, particularly as it relates to untaxed income.
No. NASFAA has confirmed with ED that Economic Impact Payments are neither taxable income nor untaxed income for Title IV purposes. They are also not estimated financial assistance . They are ignored for all Title IV need analysis and packaging purposes.
The IRS does not consider stimulus payments under the Coronavirus Aid, Relief, and Economic Security Act , the 2021 Coronavirus Response and Relief Supplemental Appropriations Act , or the American Rescue Plan Act of 2021 to be taxable income. ED does not consider stimulus payments to be untaxed income either.
Reference the IRS Economic Impact Payment Information Center, which states:
“Is the Payment includible in my gross income?
No, the payment is not includible in your gross income. Therefore, you will not include the payment in your taxable income on your federal income tax return or pay income tax on your payment. It will not reduce your refund or increase the amount you owe when you file your 2020 federal income tax return. A payment also will not affect your income for purposes of determining eligibility for federal government assistance or benefit programs.”
How Much Money Could You Expect
It depends on the differences between your 2019 and 2020 taxes and which one the IRS used to calculate your third payment. For each new dependent you claimed for the first time in 2020, they could count toward more money. And dependents of any age count, including 17-year-olds and adult dependents. And if you earned less in 2020 than you did in 2019, you might also qualify for a plus-up payment, again, depending on which tax year the IRS had on hand when it figured your amount.
Also Check: Update On 3rd Stimulus Check
Amount And Status Of Your Payment
To find the amount of the third payment, create or view your online account or refer to IRS Notice 1444-C, which we mailed after sending the payment.
If you are sent a plus-up Economic Impact Payment after your 2020 tax return is processed:
- The amount of your initial third payment will no longer show in your online account. You will only see the amount of your plus-up payment.
- The status of your initial third payment will no longer show in Get My Payment. You will only see the status of your plus-up payment.
What To Know If A Family Member In Your Household Died
If you received a payment for someone who died in 2019 or earlier, the IRS says you should return the entire payment “unless it was made to joint filers and one spouse is still living.” If you’re the living spouse, you should return half the payment — just not more than $1,200 in all.
However, if the check is issued in both your name and your deceased spouse’s name , you’ll need to return the whole amount to the IRS. After the agency processes the returned payment, it will issue a new check with the correct amount for you.
For the third check, it depends on which tax return the IRS uses. If it uses your 2019 tax return, you’ll likely get to keep the amount you received for the person who has died.
Economic Impact Payment Information: What You Need To Know
On March 27, 2020, Congress passed the CARES Act to help individuals that are negatively impacted by the coronavirus epidemic. Economic Impact Payments, an important component of individual relief, are being distributed by the Internal Revenue Service . Millions of Americans have already received their Economic Impact Payments. While the IRS continues to calculate and automatically send the payments to most eligible individuals, some may have to provide additional information to get their payments.
The New York State Tax Department recognizes the importance of the Economic Impact Payments for New Yorkers in this time of need. This information is being provided to help answer common questions about how these payments are being distributed. Please help us get the word outshare with family and friends who may be isolated due to COVID-19.
You May Be Wondering If You Have To Pay Taxes On Your Stimulus Checks The Answer May Surprise You
I’ve heard the question many times: Will I have to pay tax on my stimulus check? The tax code says you have to pay taxes on “all income from whatever source derived,” unless it’s specifically exempted or excluded. That’s a pretty broad definition that seemingly would include money from the government. And, strictly speaking, there’s no specific exemption or exclusion for stimulus check money. So, stimulus checks are taxable right?
Wrong! There’s a loophole in the law that prevents you from having to pay taxes on the stimulus check money you get from Uncle Sam. As it turns out, your stimulus check isn’t “income” after all, according to the law. Instead, it’s simply an advance payment of a tax credit. And tax credits aren’t taxable income.
If You Never Cashed Or Deposited The Paper Check You Got Here’s What The Irs Wants You To Do
If any of the above situations pertain to you, you may need to send your stimulus check back. Here’s how to do it for each scenario, per the IRS.
1. Write “VOID” in the endorsement section on the back of the check.
2. Do not bend, paper clip or staple the check.
3. On a separate piece of paper, let the IRS know why you’re sending the check back.
4. Mail the check to the appropriate IRS location — it varies depending on which state you live in.
I Didnt 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 , 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 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, youll be able to get those amounts 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 you had a big change in income during 2020 or you became a new independent filer in 2020 who meets the qualifications.
If you believe youre 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 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 dont 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.
Recommended Reading: Is There A Third Stimulus Check Coming Out
Irs Stimulus: Do You Have To Pay Back The $1400
As Americans wait for the latest $1,400 IRS stimulus checks to hit their bank accounts, many are left with one major question. That is whether or not they will have to pay back however much they receive in relief funds.
The Internal Revenue Service announced on Friday that the first rounds of stimulus checks would be going out this weekend via direct deposit. In fact, it was just hours after that announcement that some people reported having already received their money. But the IRS says that some people may be waiting until next week to get their stimulus.
Its been a quick turnaround from President Joe Biden signing the bill into law on Thursday. The $1.9-trillion relief package is set to translate into an estimated 159-million payments.
The latest stimulus payments are without a doubt the most generous yet. Individuals can get as much as $1,400, while married couples can get up to $2,800, plus an extra $1,400 per dependent. That means that a family of four can expect up to $5,600 in stimulus help.
Who Is Eligible For The Second Stimulus Check
Eligibility is primarily based on four requirements:
1. Income: The income requirements to receive the full payment are the same as the first stimulus check.There is no minimum income needed to qualify for the payment. Households with adjusted gross income up to $75,000 for individuals will receive the full payment. This stimulus payment starts to phaseout for people with higher earnings. The second stimulus check maximum income limit is lower than the first stimulus check. Single filers who earned more than $87,000 in 2019 are ineligible for the second stimulus check.
View the chart below to compare income requirements for the first and second stimulus checks.
|Income to Receive Full Stimulus Payment||First Stimulus Check Maximum Income Limit||Second Stimulus Check Maximum Income Limit|
2. Social Security Number: This requirement differs from the original eligibility for the first stimulus check. Originally under the first stimulus check, if you were married filing jointly, both spouses needed valid Social Security numbers . If one spouse had an Individual Taxpayer Identification Number , then both spouses were ineligible for the stimulus check. For married military couples, the spouse with an SSN could still get the stimulus check for themselves but not the other spouse with an ITIN.
Former first stimulus check rules:
Second stimulus check rules:
Former first and second stimulus check rules for military filers:
Also Check: What Time Does The Stimulus Check Deposit