In early 2020, many Americans received Economic Impact Payments, also known as stimulus checks*. These checks were issued in accordance with the Coronavirus Aid Relief and Economic Security (CARES) Act as a way to cushion against the economic impacts of COVID-19.
* We’re aware that these payments were electronic funds transfers for many Americans, but we’ll keep using the word check, as it is often called.
Side note: Of course another check was approved and then issued in early 2021. This one had different income limitations: Single people earning up to $75,000 will receive $600 and married people earning up to $150,000 will receive $1,200, in addition to $600 per dependent.
Our purpose here is not to comment on the effectiveness of this impact payment — that job has sufficiently been covered by countless internet memes. We’re here to talk about the tax implications of your stimulus check, but first a quick note to explain why some of you may not have received a check at all.
Wait, I Was Supposed to Get a Check?
It’s possible that you did not receive a stimulus check in 2020 because your income was too high to receive it. Adults who made less than $75,000 (or $150,000 if married) were supposed to have received $1,200 (or $2,400 for a married couple). Adults would also receive up to $500 per qualifying dependent child they had. Those with income above the aforementioned limits would have their stimulus checks reduced in amount, down to zero for those earning more than $99,000 ($198,000 for a married couple).
Will My Stimulus Check Affect My Taxes?
Your 2020 stimulus check will affect your 2020 taxes This is because, although the finer details are still not ironed out, your stimulus check was technically an advance on a future tax credit. So when the 2020 COVID stimulus tax credit is finally worked out, you’ll be sitting there in early 2021 reducing your credit by the dollar amount you received way back in Spring or Summer 2020.
Does it sting to hear that the economic stimulus is an advance on a tax credit, and that it will reduce a tax refund in your future? This is entirely understandable, and it feels that way to us. It can feel like the good news of a check in the mail is tarnished by the bad news that you’ll pay for it later one way or the other.
We can offer you some good news though. If you have any questions about this, or any other tax questions, you’re not alone! Contact us for help.
TL;DR: If you earn less than $99,000 ($198,000 if married), chances are you received a stimulus payment in Spring or Summer 2020. This amount would have been $1,200 per adult and $500 per child, with a phaseout starting at $75,000 ($150,000 if married). Though we hate to be the bearer of bad news, we feel obliged to tell you that this payment was technically an advance on a tax credit.
