A new step in filing your 2020 tax return is reporting the stimulus money you received earlier this year. Here is everything you need to know about where to add that money on your tax return.
What is a stimulus payment?
Back in March of 2020, federal lawmakers enacted an economic stimulus package as a way to support families during the challenging economic times caused by the coronavirus pandemic. That stimulus package was approved for $2 trillion – enough to provide most American families with up to $1,200 per taxpayer.
Those stimulus checks are also referred to as economic impact payments or recovery rebates. Technically, they served as an advanced tax credit on your 2020 income taxes.
How to report your stimulus money on your tax return
Reporting the stimulus money on your tax return is an entirely new process this year. TaxAct, however, makes it easy and will even help you determine if you’re eligible for more.
When filing with TaxAct, you will be asked to enter the amount of your stimulus payment. With the recent passing of a second stimulus payment, you’ll be asked to enter both payments (if received).
If you need help finding the amounts you received there are a couple options. First check if you received and saved Notice 1444 from the IRS. That document was sent via mail and lists the first stimulus amount you received in 2020. If you can’t find your Notice 1444, don’t sweat it. Many people accidentally threw the form away before they realized what it was for. You can also look back on your bank statements to find the deposit amount. The majority of stimulus amounts were deposited during the month of April, so we recommend first looking at your April statement. May and June are also possibilities if your stimulus payment was delayed for any reason.
If you wish to file your tax return before you receive a notice indicating the amount you received for the second stimulus payment, you will need to keep your own record of the amount given to you. Since the payments are being sent so soon, hopefully, remembering how much you received or quickly checking your bank account statement will make locating that dollar amount easy.
Once you’ve entered the stimulus amount, TaxAct will then calculate whether or not you received the correct amount or if you are eligible for more. Any additional amount will be added to your 2020 refund as a tax credit. And don’t worry if you received more than you should have; you don’t have to pay any of that money back.
The 411 on the second stimulus payment
If you haven’t received your second stimulus payment by the time you want to file your 2020 return, TaxAct will ask you several qualifying questions to accurately calculate how much you should receive. If not enough information is available, you won’t be able to file until you can provide the detail needed for TaxAct to help you accurately report the amount on your return. Language in the new COVID-19 relief bill states the second payments need to be sent to all eligible recipients by Jan. 15, 2021.
Regardless of the situation, TaxAct will explain why you received the amount of money you did according to your tax situation. It will also explain whether you are eligible for more. For example, let’s say you and your spouse received the first round of stimulus checks equal to $2,400 combined, which was based on your 2019 tax information. But you had a child in 2020, so based on your 2020 tax situation (aka the true basis of the stimulus payment), you are now owed an additional $500 for your new dependent. TaxAct will calculate that scenario for you and let you know if you are due any additional money.
The second round of stimulus checks are also based on your 2019 tax return, which means if you are due more than what you receive the second time, you’ll also receive that money as a credit via your 2020 tax refund.