How to Get Credit for Your Missing Stimulus Payments on Your Tax Return
As of early 2021, Congress approved two stimulus checks related to the coronavirus pandemic so far.
Unfortunately, some people may not have received their stimulus checks for several reasons.
The good news:
The stimulus checks were actually an advance of the Recovery Rebate Credit.
This is a tax credit you can claim on your 2021 tax return, which you file in 2022 or file an amended tax return in 2023. (You typically must file an amended return within three years from the original filing deadline, or within two years of paying the tax due for that year, if that date is later.)
That means people that didn’t get stimulus checks or didn’t get big enough checks can still claim their missing credit on their federal tax returns this year.
The Recovery Rebate Credit Was Paid in Advance in Two Stimulus Checks
Congress approved two stimulus checks during the coronavirus pandemic as of this writing.
How much were the payments?
The first was authorized by the CARES Act which went into effect in March 2020. It required the IRS to make payments that started getting issued in April 2020.
The amount of stimulus money you received depended on a few items.
- Those filing single could qualify for a check of up to $1,200.
- Taxpayers filing married filing jointly received a payment of up to $2,400.
Taxpayers could also qualify for an additional stimulus payment amount of up to $500 per qualifying child.
The second check was in the Consolidated Appropriations Act, 2021 which was signed in December 2020. These payments started going out in January 2021.
This check provided up to $600 for taxpayers filing as single. Taxpayers filing as married filing jointly received up to $1,200.
Each qualifying child added up to $600 to the check amounts, as well.
Payment limitations and calculations
Both of these stimulus check amounts were limited based on your income.
If a single filer had an AGI (adjusted gross income) over $75,000, their check would slowly be reduced until it reached $0.
The AGI threshold to start reducing the size of the check for married filing jointly taxpayers was $150,000.
Because 2020 income was unknown at the time of issuance for both checks, the IRS used previous tax year information.
The IRS may have used information from your 2018 or 2019 tax returns to calculate your check amounts.
How payments were issued
You may have received both rounds of stimulus payments in several different ways.
The most convenient option was a direct deposit if the IRS had your bank information.
The IRS also sent out checks and prepaid debit cards.
How These Credits Impact Your Tax Return and Refund
The stimulus check payments may not impact your tax return or tax refund at all.
Thankfully, the checks and stimulus credits should not lower your tax refund directly.
That said, other tax circumstances from 2020 may do this.
If anything, the Recovery Rebate Credit could increase your tax refund. Here’s what you should know based on your situation.
I didn’t get my check at all
If you were eligible to receive a stimulus check but didn’t get one, you can claim it on your 2020 tax return.
Fill out the information relating to the Recovery Rebate Credit to claim your stimulus money.
Didn’t get the amount?
Due to IRS using old tax return information to calculate your stimulus payment amount, you may not have received the full amount you should have.
You may have earned a large income in 2018 and 2019 but been unemployed in 2020 due to the pandemic.
Your previously high income may have disqualified you for a check you might qualify for in 2020.
Similarly, the IRS doesn’t know about new qualifying dependents you’ve added to your household in 2020.
There is no way for them to send the extra $500 or $600 payments for them with the stimulus payment amounts.
If your check amount was lower than it would have been with your 2020 income, you can claim the difference on your 2020 tax return using the Recovery Rebate Credit.
This should, if everything else remains equal, increase your refund amount.
Got paid too much?
If your check amount was higher than it would have been with your 2020 income or dependent situation, you don’t have to pay the extra money back.
While Congress made the stimulus payments an advance of the tax credit, they planned carefully.
They wrote the law so overpayments due to changes in income or dependents do not have to be paid back.
This means it won’t lower your usual refund amount if your payment was larger than it should have been.
How to Claim the Credit on Your Tax Return
If you prepare your tax return yourself with tax software, the software will ask you questions about the stimulus checks you received.
Every major provider is aware of this credit and how to file for it properly.
Popular software (and mobile tax filing) options include:
- H&R Block
- Credit Karma Tax
Based on the information you provide, it will calculate what to input on your 2020 tax return to claim the proper credit amount.
Similarly, any in-person tax preparer should ask you questions about your stimulus checks, as well.
After you file your return, you can see how much of an extra credit you’re claiming on your tax return.
You should see your credit amount on Line 30 for Form 1040 or 1040-SR.
The line item is called Recovery Rebate Credit.
Using Your Tax Refund Responsibly
If you get a refund, you can use it responsibly to help better your financial situation.
As long as you get a refund, these ideas should work whether you get an additional Recovery Rebate Credit or not.
Pay off debt
Paying off debt can be one of the smartest moves with your tax refund. This is especially true if you have high interest rate debt at 8% or higher.
Paying off debt provides an immediate benefit to your financial situation. When you pay down your balance, you’re no longer paying interest on that balance in most cases.
For revolving debt, such as credit cards, this could lower your minimum payment.
For installment loans, this likely lowers the interest you pay. The impact usually results in paying your loan off faster.
While paying off high interest rate debt with a tax refund is almost always smart, you may not want to pay off every debt with a tax refund.
Low interest rate debt may not make much sense to pay off. If you have a 30-year mortgage with a 2.5% interest rate, sinking money into that loan won’t immediately impact your finances.
Similarly, it may not make sense to pay off a 0% car loan early since you aren’t paying interest anyway.
Build an emergency fund
If you had a rough 2020 financially, you might have had to dip into your emergency fund.
Even if you didn’t have to use your emergency fund, 2020 has shown people how important they really are.
Starting or adding to an emergency fund can be a great use of your tax refund.
Financial experts often suggest building an emergency fund that has three to six months of living expenses within it.
Building these emergency funds won’t happen overnight.
However, using financial windfalls like tax refunds can help you make real progress toward these goals.
This is true even if you can’t contribute much to these savings accounts regularly.
Invest for the future
People in great financial shape can still use their tax refunds to better their finances.
If you’ve paid off your debt and built a fully stocked emergency fund, investing is usually the next step.
The first place most people turn to next is funding their retirement accounts.
You could increase your 401(k) contributions at work to use up your tax refund money or contribute to an IRA or Roth IRA if you’re eligible.
Once you’ve maxed out your retirement accounts, you may want to contribute to a college savings account for your children.
Even after tax-advantaged opportunities are taken care of, you can always invest in a taxable brokerage account.
Carefully consider your long-term financial goals before choosing which types of accounts to invest in.
You may not want to put the money into a retirement account if you need to access the funds before age 59 and ½.
Set aside some for fun
While using your tax refund responsibly is a smart move, it isn’t fun.
After the rough year of 2020, most people could use a bright spot in their daily lives.
You may want to set aside a small part of your tax refund, such as 10%, to have a little bit of fun with.
This way, you aren’t tempted to dip into the money later on for a bigger splurge purchase.
This isn’t the ideal usage of a tax refund.
Even so, it may be the right move if it helps you from spending the whole refund on things that don’t improve your overall financial situation.
Consult Tax Software or a Tax Professional for Help
If you missed stimulus payments when checks, direct deposits or cards were sent out, you can file your tax return to claim missing stimulus money.
The easiest way to do this is by using tax software to complete your return.
Alternatively, you can hire a local tax professional to complete your return for you, as well.
Of course, you can always file your 2020 tax return by hand if you wish.
In this case, make sure to read the tax form instructions to learn exactly how to claim any missed stimulus payments you should have received.