With two rounds of stimulus checks received and a third one potentially on the way, many people are entering this year’s tax season with more questions than ever. As many have proclaimed, last year was unprecedented: the pandemic disrupted every aspect of life, making nearly everything more complicated.
With decades of experience in tax planning and filing for small businesses, we believe this tax season is shaping up to feel the same way. Here’s a look at the most common questions our clients have about how tax returns and stimulus checks are linked.
Is my stimulus check taxable?
Here’s a bit of good news: the stimulus checks are not considered taxable income. It does not count as income, so whether you received one or plan to receive one, it is not taxable per the IRS.
What if I haven’t received my stimulus check or it wasn’t the right amount?
If you were supposed to receive a stimulus check and have not received one yet or did not receive the full amount due, you can file for a Recovery Rebate Credit when you do this year’s taxes.
The Recovery Rebate Credit will count as credit towards this year’s taxes, which means you could see either a decrease in taxes owed or an increase in your tax return.
If you aren’t sure what you were owed, you use the Recover Rebate Credit Worksheet plus the IRS’ calculated amount from the letter the agency sent you. For reference, these are Notice 1444 for the first payment and Notice 1444-B for the second payment.
Will filing early help me receive my refund earlier?
Yes, filing earlier than the April 15th deadline will potentially help you receive your refund sooner. It may help you receive any missing stimulus money faster as well.
Will filing early help me receive the 3rd stimulus check faster?
As this legislation is on the table for mid-March, it’s uncertain when the next round of stimulus checks will go out. However, you could go ahead and sign up for direct deposit with the IRS if you haven’t already as one way to potentially receive your stimulus first.
Taxes are complicated enough most of the time. With the pandemic and multiple rounds of stimulus checks, we are working very closely with clients to double-check eligibility and ensure they are filing in the way that’s most beneficial for themselves and their businesses.
Do you have questions about taxes, payroll, or how to plan the financial future of your small business? Contact us today.