The IRS will begin accepting federal income tax returns February 12, which means, as of this Friday, it's officially tax season. If you never received a stimulus check or if you didn't receive the full amount, filing your 2020 taxes can give you the opportunity to claim any aid you missed out on, says Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center.
"The economic impact payments were based on your 2019, or in some cases your 2018, income," Holtzblatt explains, so the agency didn't know if the Covid-19 pandemic and recession affected your finances last year. "When you file your 2020 taxes, the IRS will know how you might have been affected by the pandemic," she says.
If you didn't get the full value of those two stimulus checks and your income fell last year, you could be eligible to receive that aid in the form of a tax credit called the Recovery Rebate Credit.
Income is just one factor Uncle Sam will take into account, Holtzblatt adds. "There are all kind of circumstances that can help you claim a larger amount," and asking yourself these 4 questions when you file your taxes this year will help you determine if you're owed additional cash.
The maximum payment was $1,800 per single taxpayer across 2 rounds: $1,200 in the spring and $600 at the beginning of 2021. Under the first relief bill, eligible parents were entitled to up to $500 per qualifying dependent child. The 2nd relief bill boosted that amount to a maximum $600 per child.
If you received the maximum payment both rounds, you won't qualify for the Recovery Rebate Credit.
But if you didn't get the full stimulus, you should tally how much you received. There are 3 easy ways for you to check the balance of your stimulus checks.
Video by Helen Zhao
The government will base the size of your Recovery Rebate Credit on your 2020 adjusted gross income, or, put plainly, your income minus certain deductions.
The income requirements set by the government for both rounds of stimulus checks was the same: If you earned up to $75,000, you are eligible to claim the full recovery rebate credit. If your salary is more than $75,000 but less than $99,000, you're eligible for a reduced credit. The IRS will base the amount you receive on a sliding scale, with the amount falling by $5 for every $100 in income above $75,000.
If you were married and are filing jointly in 2020, you're eligible for the full credit if your and your partner's combined income was up to $150,000. If you and your partner earned more than $150,000 but less than $198,000, you're still eligible for a reduced credit based on the same sliding scale.
Grow's calculators can help you determine how much you should have received for both rounds of Covid stimulus.
Taxpayers who collected unemployment insurance in 2020 should be aware, however, that those benefits are considered taxable income, Holtzblatt warns.
Senator Richard Durbin, D-I.L., and Congresswoman Cindy Axne, D-I.A., are currently working on legislation to ease that tax burden. Should it pass, their bill, known as the Coronavirus Unemployment Benefits Tax Relief Act, would waive federal income tax exposure on the jobless benefits a person receives from their state labor agency.
Remember, your first stimulus payment was based on your income in 2018 or 2019. If you've added to your family since then, you could be eligible to receive additional Covid-19 related financial aid, Holtzblatt explains.
Both coronavirus relief bills signed into law in 2020 included aid for parents. So, if you gained another member of your family, whether by adopting a child, or giving birth to one, you could be entitled to additional cash.
Parents who meet the stimulus check income eligibility requirements detailed above could qualify for a credit worth up to $500 from the first stimulus round, and up to $600 for the second.
If you were declared as a dependent on someone else's tax return in 2019 or 2018, but you were no longer considered a dependent last year, then you can claim the payments on your own 2020 return.
This may apply to recent college graduates, Holtzblatt says. "Let's say you were in college in 2019 but you graduated and were out on your own in 2020." As long as you meet the income requirements and are over the age of 17, you should be eligible to receive a credit of up to $1,800 when filing your 2020 taxes.
If you received stimulus money, you don't have to give it back even if your financial circumstances have changed, Holtzblatt says. "Let's say your income rose in 2020, your child left the nest, or you became a dependent on someone else's tax return: You're not going to have to give that money back."
You also don't have to worry about paying taxes on stimulus money. Any aid you received is not considered taxable income, according to the IRS website.
"They aren't going to penalize taxpayers because they gave them too much," Holtzblatt says. "The IRS had to use the information they had to get the money out quickly, which, at the time, was your 2019 or 2018 circumstances."
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