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Second Stimulus Payment Frequently Asked Questions

Tax Filing Tax Planning Taxes

On Jan. 10, 2021, we announced the IRS has committed to reprocessing stimulus payments directly to our customers impacted by the IRS payment error. This decision was made after days spent advocating for our customers and pushing the IRS to rightfully send these much-needed stimulus dollars quickly to our customers.

A man looks at his computer as he thinks about his second stimulus payment.

The IRS’ choice to reprocess the funds via their internal system is not the choice we preferred. We offered multiple alternative solutions to the IRS, including one that would have allowed our customers to likely receive their payments as early as this week (Jan. 11 – 15). Unfortunately, because the IRS controls the stimulus funds and has possession of the money, the IRS has the final say on how the funds reach our customers. Nevertheless, we will continue to advocate for our customers and push on the IRS until our customers who have been deeply impacted by the IRS error receive their stimulus payments.

To help clear up any confusion surrounding this decision, we’ve compiled the commonly asked questions we’ve received since this announcement was made. Continue reading for additional details regarding the payment timing of the second stimulus.

You can also check out the IRS’ official statement by visiting the IRS Statement — Jan. 10, 2021 Update on Economic Impact Payments page.

Frequently Asked Questions

When will I receive my stimulus payment if I’ve been impacted by the IRS error?

The IRS has committed to reprocessing the stimulus payments directly to impacted individuals later this month. In our last meeting with the IRS, we were told customers could expect to receive their payments by Feb. 1. Check out the IRS’ official statement regarding reprocessing the payments.

Is there a chance I will receive my payment before Feb. 1?

The date the IRS gave us was Feb. 1. There is a chance some impacted customers may receive their payments before that date, but we cannot guarantee it. The processing timeframe all depends on the speed of the IRS getting their systems running and is dependent upon the processing time of each customers’ banking institution.

Does the IRS have my current bank information to reprocess my payment?

If your banking information has not changed since the last time you filed a tax return or received the first stimulus payment (whichever occurred last), then yes, the IRS has your accurate banking information. Unfortunately, if you changed your bank account since the first time you received a stimulus payment and you did not update that information with the IRS directly, they will not have your new banking information. IN that instance, you can expect to receive your stimulus payment as a paper check.

Can I update my banking information through TaxAct?

Unfortunately, no. Since TaxAct is not a banking institution and does not control the payment of the stimulus funds, we do not have the ability to update your bank information with the IRS. If your bank information changed since the last time you filed a tax return or received the first stimulus payment (whichever occurred last), you can expect to receive your payment as a paper check which will arrive through the mail.

How do I find out if I’ll receive my stimulus money by direct deposit or by check?

That information may be available if you check the status of your payment using the IRS’ Get My Payment tool. The IRS has indicated to us that they intend to update the Get My Payment tool with payment information for those impacted by this error at the end of Jan. That said, there is still a chance your payment information may not be available using the tool.

If you changed your banking account information since the last time you filed a tax return or received the first stimulus payment (whichever occurred last), you will likely receive your stimulus money in the form of a paper check.

Do I need to claim the Recovery Rebate Credit to receive my stimulus payment?

If you were impacted by the IRS error and used TaxAct’s refund transfer option to pay for your filing fees last tax season, you do not need to do anything in order to receive your stimulus payment. The IRS has stated they will reprocess the payments directly to our impacted customers by Feb. 1. To read the IRS’ official statement confirming this decision, please visit the IRS Statements and Announcements page.

If you did not pay for your filing fees using our refund transfer method but you changed your bank account since you received the last stimulus payment, you will need to claim the Recovery Rebate Credit on your 2020 tax return in order to receive your stimulus payment. The stimulus money will come as part of your tax refund.

Should I wait to file my 2020 tax return until after I receive my stimulus payment?

No, you do not need to wait to file. Since the IRS confirmed they will reprocess the stimulus payments for those impacted by their error, there is no need to wait to file. You do not need to receive your stimulus payment in order to file your return.

All TaxAct products are updated to assist filers with accurately accounting for their stimulus payments on their tax returns. For more details on how to do that, please visit our Form 1040 – Recovery Rebate Credit support FAQ page.

How do I receive my stimulus payment if I’m impacted by the IRS error?

The IRS confirmed on Sunday, Jan. 10 that they will reprocess the stimulus payments directly to individuals impacted by their error. They will send those payments out via direct deposit or by paper check through the mail. Make sure to keep a close eye on your mailbox to ensure you do not accidentally throw away the check. You do not need to do anything else to receive your stimulus money.

You can read the IRS’ official statement regarding the error by visiting the IRS Statement – Jan.10, 2021 Update on Economic Impact Payments page.

Is TaxAct offering any cash advance or loan options related to the stimulus payments?

At this time, TaxAct is not offering any cash advance or loan options. The IRS has confirmed they will reprocess the stimulus funds impacted by this error directly to our customers. While the option they chose to make that happen will take much longer than we wanted, we know our customers will receive their stimulus payments in the next couple of weeks.

Many cash advance and loan offerings come with strings attached. Most of the time, additional fees are tied to those type of offers, which takes some of the money away from the individual who chooses to use it. At TaxAct, we do not feel it is appropriate to offer that type of option as we know how important every last stimulus dollar is to our customers. We want those impacted to receive all of their stimulus payment and not be subject to additional fees.

I thought all stimulus payments had to be sent by Jan. 15 or we had to file to receive our money. Is the IRS granting an exception to that deadline for these payments?

Yes, an exception is being granted for the payments impacted by the IRS error. Since the IRS made the error with this specific group of payments, they have committed to reprocessing the money directly to the affected individuals and will not force them to wait to receive their money with their tax refund.

If you are part of those impacted by the IRS error, you do not need to do anything else to receive your stimulus payment. Read the IRS’ official statement regarding the error for more information.

Will TaxAct help me report my stimulus payment on my 2020 tax return?

Absolutely! All TaxAct products are up to date with the latest stimulus information and are ready to help you confidently report all of your required tax information.

To enter or review your Recovery Rebate (aka stimulus payment) information in TaxAct, follow these steps:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Credits in the expanded menu.
  3. Scroll through the list of credit topics until you reach “Recovery Rebate Credit”.
  4. Click Review.
  5. The program will lead you through the necessary steps to complete this section.

What is the Recovery Rebate?

Great question! The Recover Rebate Credit is how the IRS refers to your stimulus payment on the 2020 individual tax return (or Form 1040, U.S. Individual Income Tax Return, if you want to get specific).

It was added to the return in order to reconcile the stimulus payments (otherwise known as EIPs) issued based on tax year 2020 information. That includes both the first and the second stimulus payments.

We realize that may cause you to wonder if the stimulus money is taxable. But the good news is that it is not considered taxable income. Instead, it is an advance on tax credit (Recovery Rebate Credit) that was created to provide relief to Americans during the COVID-19 pandemic. Credits – even when they come in advance – are not taxable on your return.

One of the main benefits to reporting the stimulus payments on your return is to see if you qualify for additional funds. The stimulus payments that many filers received likely are accurate, but there are a few instances where some filers may qualify to receive more.

By reporting what you received on your tax return, you can calculate to see if you are due more money. If that’s a bit confusing, let us explain further.

The benefit of reporting your stimulus payment on your tax return

The stimulus payments are an advance on a tax credit specifically designated for the 2020 tax year. Since both stimulus payments were sent out before the 2020 tax return was filed, the IRS used the information they had on file for individuals from their 2019 tax returns to determine the amount of money each qualifying person should receive.

Because of that, some payments may not have been entirely accurate as some individual’s tax situations may have changed from 2019 to 2020. For example, if you had a baby in 2020, that would add extra money to your stimulus payment because additional funds are given for all qualifying children. An extra $500 was given in the first round of stimulus payments for every qualifying child and an extra $600 was given for the second round of payments.

In this example, since the individual who had the baby in 2020 didn’t have that child on their 2019 tax return, the IRS did not give them the extra stimulus money. By reconciling their stimulus payments on their 2020 return, the IRS will get an update that they had a qualifying child in 2020, which will qualify them for extra stimulus dollars. That money will come as part of their tax refund once they file their return.

Fortunately, TaxAct makes it very easy to report the stimulus dollars and calculate whether you are due additional funds. In fact, the product does the calculations for you. All you need to do is answer a few quick questions about your stimulus payments, and the rest is taken care of on your behalf. Check out our Form 1040 – Recovery Rebate Credit FAQ page for instructions on how to report your stimulus payment using any TaxAct product.

Once you answer those questions, the TaxAct product will let you know if you qualify for additional stimulus funds or if you received the correct amount.

A message from TaxAct President, Curtis Campbell

Watch the following video to hear the specifics of the IRS error and the decision on the payment timeline directly from our president.

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