We all hope the stimulus checks that Americans are getting will help pull the country out of the coronavirus-induced economic mess we’re in right now. But there have been many questions surrounding the payments themselves and how they’re being processed. Who qualifies? How much money will I get? When will payments be sent? Why can’t I track the status of my payment? The IRS has, for the most part, done a pretty good job of answering these questions over the past few weeks. However, there is one burning question that the IRS didn’t answer until now: Will I have to pay back any stimulus check money if I got too much?
(Use our Stimulus Check Calculator to see how much money you’ll get. For answers to other stimulus check questions, see Your 2020 Stimulus Check: How Much? When? And Other Questions Answered.)
Paybacks Won’t be Required in Most Cases
The IRS recently acknowledged that “there is no provision in the law requiring repayment” of a stimulus check. The way the law is written, stimulus checks are actually just advanced payments of a new “recovery rebate” tax credit for the 2020 tax year. If your check is less than your 2020 recovery rebate credit, the law specifically says you’ll get the difference when you file your 2020 tax return next year. But the law is not so clear on what happens if your stimulus check is more than your 2020 credit. Thankfully, the IRS has provided guidance. You won’t be required to repay any stimulus payment amount when filing your 2020 tax return, it says.
Who’s Getting a Stimulus Check That’s More Than the Credit Amount?
The amount of your stimulus check is based on your filing status, your adjusted gross income (AGI), and the number of children you have who qualify for the child tax credit (they must be 16 years old or younger). If you filed a 2018 or 2019 tax return, the IRS will get this information from one of those returns (whichever one you filed most recently). However, you could have a change in circumstances this year that shrinks the recovery rebate credit allowed for 2020. This could mean that the stimulus check you receive this year is larger than the authorized tax credit on your 2020 return. Here are a few examples:
Change in Filing Status. Harold and Maude got divorced in 2020. They have a combined 2020 AGI of $160,000 ($100,000 for Harold and $60,000 for Maude), which is the same total AGI they had in 2019. Since they have no kids and filed a 2019 joint return, they received a $1,900 stimulus check. However, based on separate 2020 returns (single filing status for each), Maude qualifies for a $1,200 recovery rebate credit, but Josh doesn’t qualify for a credit at all because his 2020 AGI is too high. Harold and Maude will not have to pay back the additional $700.
Increased Income. Nicholas got a promotion and a big raise in 2020. As a result, his AGI jumped from $80,000 in 2019 to $95,000 in 2020. He is single with no children. Based on his 2019 return, Nicholas received a $950 stimulus check. However, based on his 2020 AGI, he will only qualify for a $200 recovery rebate on his 2020 tax return. Nicholas will not have to pay back the $750 difference.
Child No Longer Qualifies for Child Tax Credit. Andrew and Becky have a child who turns 17 in 2020. They were able to claim the child tax credit on their 2019 tax return, which they filed in February 2020. As a result, they got an extra $500 in their stimulus check. However, since they cannot claim the child tax credit on their 2020 return, their recovery rebate credit does not include the additional $500. Andrew and Becky will not have to pay back the $500.
What About Erroneous Stimulus Payments?
What if the IRS accidentally sends you two stimulus checks? Can you keep both of them? Probably not. For situations like this, expect the IRS to use its regulatory powers to “avoid allowing multiple credits or rebates to a taxpayer.” So, I wouldn’t spend that money if I were you. Same goes for stimulus money obtain through fraudulent means–not that you’d do such a thing!
(Article written by Rocky Mengle)