Most Americans don’t understand that the COVID-19 stimulus payments are meant to be a simple tax break — and don’t really constitute “free money.” Many millions of Americans did not receive the second round of payment before tax season rolled around, which means they are entitled to file for the rebate when they file their taxes. Most tax software will inquire whether or not you received the economic impact payment, so don’t worry until after you file your taxes!
Keep in mind that an inaccurate tax filing could impact your ability to receive a timely payment. To receive a prompt payment, consider filing with a professional. You can also sign up with the federal government to receive future payments through electronic deposit if they were automatically scheduled to be delivered through the mail.
You will find a Recovery Rebate Credit Worksheet on Form 1040/Form 1040-SR. Check the document’s instructions if you are not sure how to fill it out.
The federal government allows many Americans to file for free using its “Free File” program. If your household makes $72,000 or less, you are eligible to use it — and this is almost always the fastest method if you expect a tax refund.
Check here for more information.
The “Get My Payment” website received its final update for the second economic impact payment on January 29. It will probably not be updated again until another stimulus package is passed through Congress. The second round of payments resulted in $142 billion in returned funds to eligible Americans using 147 million electric transfers. The remaining funds were disbursed through the USPS. The next stimulus is an expected $1400, which will bring the previous payment to the controversial $2,000 figure.
There are a number of other taxes that have strange classifications under economic law, including FICA, unemployment, and Workers Comp. The latter is a pool of money into which businesses (and employees) pay, which allows businesses to cover employees’ medical expenses when an accident occurs. These are completely deductible as business expenses when filing taxes.
Workers comp lawyer Adam Skutner said, “No, you do not pay taxes on workers’ compensation payments…Workers’ compensation payments are generally tax-free for the entire time that the worker receives them. Of course, some important exceptions apply if an injured person gets both workers’ compensation and disability payments. If the injured worker also receives disability payments, the portion of the amount attributable to disability is taxed.”
Unemployment works similarly. When you lose your job, the benefit returned to you was already partially paid through taxes by you and your employer — but you still have to pay new taxes on the benefit received.
Have any questions about the relationship between economic law and taxes? A lawyer or tax professional can likely answer many of your questions during a free consultation, which will give you a decent idea of whether or not it’s worthwhile to hire a specialist to sift through your tax documents when it comes time for a rebate check.