Stimulus check: do I need to pay taxes on the relief?
The situation around when a further stimulus relief package will be agreed remains uncertain, but the tax implications on payments to Americans is fairly clear.
A second stimulus check has been a long time coming as many millions of American households continue to struggle financially with the pressures put on them by the coronavirus pandemic. Negotiations between Republicans and Democrats were abruptly brought to a standstill by President Donald Trump, then they were back on. Where this saga regarding a further relief package ends, no one quite knows, but here’s a summary of where we are.
With regards to the stimulus checks alone, one thing we can be fairly certain of is the tax status.
Will the second stimulus check be taxed?
Roughly 160 million people in the US received a stimulus payment worth up to $1,200 as part of the CARES Act signed back in March, a payment that was not considered taxable income by the IRS.
And despite the confusion, there are still some positive noises being heard about a second round of payments being made before the end of the year, with the rules applied for the first stimulus check likely to serve as a model for the second.
This would mean that people would not pay taxes next year on the IRS payment as it is not considered to be income under the definition, and any payment received in 2020 would not reduce your return or increase the amount you owe at the time you file your taxes in 2021.
The stimulus checks are effectively an advance on your 2020 tax credit, and so they do need to be reported when you file your 2020 taxes. With the US presidential election just a few weeks away, and the Trump administration keener on getting the Supreme Court position filled than arranging the relief, further delays to the timing may be seen.
First stimulus check: deadline extended
The IRS has announced that it will extend the deadline for Americans to register for the first round of stimulus checks that were approved with the CARES Act in March. Around nine million citizens who are eligible for the Economic Impact Payment are yet to receive the support offered to help deal with the financial consequences of covid-19.
The initial cut-off date to register was 15 October but that has been pushed back to 21 November to allow as many people as possible to get the payment.
Speaking about the decision to extend the deadline for those who need to register, IRS Commissioner Chuck Rettig said: “We took this step to provide more time for those who have not yet received a payment to register to get their money, including those in low-income and underserved communities.”
He added: “Time is running out for those who don’t normally file a tax return to get their payments.”
“Registration is quick and easy, and we urge everyone to share this information to reach as many people before the deadline.”
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