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Will I get a Stimulus Check if I Owe Taxes?

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The IRS is sending millions of stimulus checks, and one may be headed your way. A lot of Americans have received their three stimulus checks. If the eligible persons have not received their 2020 stimulus check, they will receive the cash in Recovery Rebate Credits.

Knowing your eligibility can help you make better financial plans. However, you may still be confused about whether you are eligible for a stimulus check or not.

One of the main reasons for doubting your eligibility is your incapability of paying all taxes. If you also owe back certain taxes to the Internal Revenue Service (IRS), such as child support, there is a possibility that your stimulus check may be garnished. Here are certain points that you should be aware of regarding stimulus checks.

Are stimulus check payments taxable?

Every sort of benefit (unemployment benefits) is considered taxable. However, stimulus payments are non-taxable and not reported on your tax returns as an income. So, if you are expecting one, consider it an additional income source that you don’t have to add while calculating your gross income.

What happens to your stimulus payment if you owe taxes?

Generally, your refunds are intercepted if you have any outstanding balance. Your intercepted refunds are used to offset your pending federal and state debts. 

However, this rule is not quite applicable to the stimulus check. As the primary purpose of it is to boost the economy and help those in dire need, your check may not be intercepted due to your outstanding balance. You can use this check for paying off your tax debts only after receiving it.

Still, there is an exception to it. According to the CARES Act, one thing can stop you from receiving your stimulus check. 

Your first stimulus check can be intercepted to offset the child support taxes. However, the rule changes for the second check, and even if you owe child support, banks, and private creditors, you will receive a stimulus check.

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Similarly, your third check will not be confiscated for the outstanding child support but can be stopped for the private debts.

Recovery Rebate Credit to pay your overdue balance

Receiving stimulus check

If you didn’t receive any stimulus payment, you could claim Recovery Rebate Credit while filing for your 2020 tax returns. So, you would be able to get back the stimulus money that you missed.

Conversely, if you owe some balance to the IRS, they can garnish your rebate credit to offset your back taxes.

Do you have to apply for the stimulus check?

Most of the time, you have to do nothing to receive your stimulus check. Your eligibility is assessed on the previous year’s tax returns. Using your prior year’s tax returns information, the IRS sends your payments directly in your bank account or through the mail.

The Federal Government has finished distributing the first two payments till the end of February 2021. The eligibility for non-filers was assessed on 2019 tax returns information, and 2020 tax returns information for the filers.

However, if you make less than $72,000 in a year, you are exempted from filing taxes because of low earnings. Hence, you can apply for stimulus payment through the portal on the IRS website. The portal is closed now as stimulus checks for 2020 are already distributed.

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For the unpaid stimulus check, you must file for the 2020 Recovery Rebate Credit. You can file your tax returns on IRS free file program on Form 1040 or 1040-SR.