Feb 12, 2021
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Aiming to file your taxes soon for a speedy tax refund? Well, this year, you better step back a minute and first ask yourself, "Hey, how much money exactly did I get for that stimulus?"
And: "What about that second stimulus check? Did it ever show up?"
These are odd questions. After all, stimulus payments aren't taxable at the federal level but you are still going to need those exact numbers for the stimulus payouts to process your 2020 federal income tax return.
"The way our tax software works it assumes you did not get a stimulus check unless you tell it you did," said George Smith, a CPA with Andrews Hooper Pavlik in Southfield.
And you're going to need a dollar amount of that stimulus to plug into the tax software. It's not just a yes or no question and then off we go.
Another clue: Everyone did not get the same stimulus payment, so no copying from your neighbor.
What is IRS Notice 1444 and why do I need it?
Smith said he's noticed that clients who felt they were prepared to file in January but didn't realize that the stimulus information is essential. And some had a hard time conveying information about what kind of stimulus checks they received or not in 2020 and 2021.
"Taxpayers should have received IRS Notice 1444 for the first Economic Impact Payment and received Notice 1444-B for the second EIP they received," Smith said.
"I have yet to have a client give me these forms."
The Internal Revenue Service will begin processing 2020 tax returns Friday. The season officially starts about two weeks later than last year, as the IRS said it needed more time to program and test its systems after the Dec. 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.
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This year's tax season could trigger anything from a mild headache to a major migraine for many taxpayers, given the added complexities of a few new tax rules, massive unemployment during the pandemic, widespread ID theft and the one-two punch stimulus program. Just to name a few.
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The stimulus itself might create a few hiccups for people who once dreamed that they're now done with anything relating to the stimulus since they received their money.
So far, it's fairly common among early tax filers that they don't realize that they need information to confirm their stimulus payments, according to Matt Hetherwick, director of individual tax programs at the Accounting Aid Society, which offers free tax help to families and individuals with incomes of up to $57,000.
Hetherwick said it wasn't communicated very well up front that people needed to keep their paperwork and plan to provide that information to a tax professional when they filed a 2020 tax return.
"We recognized this as being a potential situation, so we prepared our staff to utilize various questions with taxpayers to obtain the information," Hetherwick said.
"If the taxpayer is unable to confidently provide the accurate amount, then we share with them that they can request a transcript from the IRS that will provide the amount that was distributed by Treasury," he said.
Will my stimulus payment be taxed?
If you received a stimulus payment, the money isn't going to be taxed at the federal level.
Again, your tax software could ask that you run through some numbers to make sure that you got every dollar of stimulus that you deserved.
TurboTax said you will need to know the amounts of the first and second stimulus payment when you file.
If you received the full amount of the first and second stimulus payments, TurboTax notes, you don’t need to do anything, but if you didn’t receive a full payment, you may be eligible for more stimulus in the form of a Recovery Rebate Credit.
TaxSlayer also confirmed that its tax software asks for the exact amount of the two stimulus payments received to calculate whether a taxpayer is eligible for the Recovery Rebate Credit.
You'll need to refer to Form 1444 and Form 1444-B to spot that specific number.
If you lost or threw those forms out, you might be able to double check the amount by researching your direct deposit information at the bank for your stimulus payment.
One taxpayer told me he was able to log into his bank account, search for the direct deposits, and he ended up finding the amount for the stimulus payments fairly easily.
IRS tax forms with tax refund check.
Brittany Benson, senior tax research analyst, The Tax Institute at H&R Block, said even if you don’t receive, or didn’t keep a Notice 1444 for a stimulus payment, you should still enter the amount you received in advance payments to accurately calculate your recovery rebate credit. You can use an IRS online account and go to the “tax records” tab to see the amount of EIPs received.
The IRS suggests that you can check your IRS account online for the stimulus amount received, if you misplaced Form 1444 or Form 1444-B.
The IRS only began mailing out Form 1444-B for the second stimulus payments the first week of February. So there's a shot that form will show up in the mail soon. Don't throw it out.
Like anything involving taxes, it's best not to guess or make up a number.
Who is running into problems?
If you do your own taxes, things might be pretty easy if you know you received a flat dollar amount, say $1,200 for a single person in 2020 and $600 for a single person in 2021.
A problem can come into play, though, because everyone did not get the exact same amount for their stimulus payments. The stimulus payment reflects your income, as well as how many children you have age 16 or younger.
You could easily receive more or less than those often quoted amounts.
The amount of the stimulus was reduced, for example, after you hit a certain income threshold.
Take the first stimulus payout, which some taxpayers began receiving last April.
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A single person who had more than $75,000 in adjusted gross income saw the size of his or her stimulus check drop by $5 for every $100 of income above that threshold. Individuals who earned more than $99,000 did not receive the first round of stimulus money.
What started out at $1,200 might have turned into $800 or $650 or some other number for single higher income earners who don't have children.
The threshold for reduced payments hit married couples filing jointly with income above $150,000. Couples who earned more than $198,000 and file a joint return did not qualify for stimulus cash.
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The first stimulus payment was up to $1,200 for individuals — $2,400 for married couples — and $500 for qualifying children ages 16 and younger.
The smaller second stimulus is spelled out in Notice 1444-B. The stimulus that began to roll out in January was up to $600 for individuals — up to $1,200 for married couples filing a joint return — and $600 for qualifying children ages 16 and younger.
What if I didn't get a stimulus payment yet?
Some people who qualify did not receive an Economic Impact Payment last year or the latest stimulus payments in 2021 and they will need to file a 2020 tax return to claim the Recovery Rebate Credit.
Others know they qualified for a larger payment that was issued in the spring and summer but they never got the money.
You'd have to file a 2020 federal income tax return to claim that recovery rebate credit even if you normally have a lower income and would not be required to file an income tax return.
The Recovery Rebate Credit will reduce how much you might owe on your 2020 income tax return or boost your tax refund, which you'd receive sometime in March, April or later.
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The Recovery Rebate Credit is listed on Line 30 of the 1040 Form for the 2020 tax year.
H&R Block's Benson noted that Form 1040 instructions include a worksheet that calculates the correct credit amount for the taxpayers and then subtracts any advance payment of the stimulus they received. Any amount still owed to the taxpayers goes on line 30.
"When the tax return goes to the IRS with an entry on line 30, the IRS will check its records to see if it agrees with the calculation," Benson said.
"If the IRS agrees, the return will move forward. If the IRS calculates a different amount for the rebate credit, the tax return will likely be held for additional verification."
Be prepared to wait for an income tax refund
In general, the IRS has noted that that most refunds are in less than 21 days after an electronically filed return has been accepted by the IRS system. Some estimate, for example, that if the IRS accepts your return Feb. 12, it could be possible to receive a refund via direct deposit as soon as Feb. 23.
Go to IRS.gov to track "Where’s My Refund" to get updated information. The IRS notes that you can start checking on the status of your refund within 24 hours after the IRS receives your e-filed return or four weeks after you mail a paper return.
Warning: If you claimed the Earned Income Tax Credit or the Additional Child Tax Credit, the earliest you can expect to get your federal income tax refund could be the first week of March if you file your return early online, choose to get your refund by direct deposit and the IRS finds no issues with processing your return.
ContactSusan Tompor: firstname.lastname@example.org. Follow her on Twitter@tompor.