If you're waiting for another stimulus check, you may have questions. We have some answers.
If you attempted to file your 2020 return earlier than usual, you might have been in for a surprise. The IRS -- which usually begins accepting tax returns around the last week of January -- pushed the process back by about two weeks, only opening their doors for tax returns last Friday, Feb. 12.
The delay to the start of tax season has left many wondering if the IRS will be able to do it all -- finish getting the second round of stimulus checks to those eligible, process 2020 tax returns, and send out a potential third round of direct stimulus payments.
The IRS expects to process around 160 million individual tax returns over the next few months. And according to the department, it is ready for the onslaught. It's a bold claim, considering the number of people who found themselves in unfamiliar financial situations last year. If you're feeling financial pressure and need both your tax refund and next stimulus check, you may have questions. Here, we'll attempt to answer some of them.
Are my stimulus checks taxable?
No, direct stimulus checks are not taxable and need not be reported as income.
What if I haven't received one (or both) of my first two stimulus checks?
Look for the line "Recovery Rebate Credit" on your tax return. If you were eligible for direct stimulus payments but did not receive them, claim them on this line. If you're owed a refund, the IRS will tack stimulus money onto the refund. If you owe taxes for 2020, the IRS will deduct the amount you are owed in stimulus funds from your balance due.
Should I wait to file my tax return until after I've received another stimulus check?
That depends. Stimulus eligibility for the first two checks was based on your 2019 tax return. If you haven't filed your 2020 taxes by the time another check is released, the IRS will continue to use your 2019 tax return to determine eligibility. If you earned less in 2019 than in 2020, you might want to hold off filing your taxes until the next round of checks goes out. If you made less in 2020 due to the pandemic (or any other reason), it might be beneficial to file as soon as you can. One caveat: Only file quickly if you have the documentation you need to file an accurate return.
Do I have to file taxes on unemployment benefits?
Because COVID-19 led many to file for unemployment insurance for the first time, some recipients might not realize that unemployment is taxed by the federal government and some state governments. While Democrats in Congress have discussed forgiving part of those benefits, nothing has been passed into law. So, yes, if you received unemployment benefits, you have to pay taxes on them.
Where do I find my unemployment tax form?
To declare unemployment payments, you will need a Form 1099-G. Some people receive their 1099-G in the mail, while others need to go online to download a statement. If you haven't received your 1099-G yet, check your state's department of labor website for directions.
Will tax season extend the time it takes for me to receive my next stimulus check once legislation is passed?
According to the IRS, the answer is no. After two rounds of stimulus checks, the IRS believes it can get the next payment out the door rapidly. It took the IRS less than three weeks to get each of the first two rounds into millions of bank accounts.
If the pushback of the IRS tax season left you in the lurch and you're concerned about covering next month's bills, ask your bank about its coronavirus hardship loan options. And check out our coronavirus resources for more information.
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February 17, 2021 at 10:32PM
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Stimulus Check Update: The Connection Between Stimulus Checks, Unemployment, and Tax Season - Motley Fool
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