The IRS says the federal government’s third stimulus check is not considered gross income and is therefore not taxable.
With the start of a new year, some people have started thinking about the information they need to file their tax returns, especially given the different economic policies introduced in 2021 – from the advance child discount to the third stimulus check.
The latter was on VERIFY viewer Kathy’s mind. She emailed to ask whether the third stimulus check, which many people received in 2021, will be taxed by the federal government.
Does the Federal Government Tax the Third Stimulus Control?
No, the federal government is not lifting the third stimulus check.
WHAT WE FOUND
The third stimulus check, formally known as an economic impact payment, was a product of the American rescue plan, which came into effect in March 2021. Persons eligible for payments could receive up to $1,400, and married couples filing joint returns can receive up to $2,800. People can get too $1,400 for each qualifying dependent. As of late July 2021, the IRS said it had made over 171 million payments.
For the millions of people who received that extra money, the IRS says it’s not part of their gross income.
“Therefore, you do not include the third payment in your taxable income on your 2021 federal income tax return or you do not pay income tax on the third payment,” says the tax authorities on its website. “It will not reduce your refund or increase the amount you owe when you file your 2021 federal income tax return in 2022.”
The third stimulus check was actually an advance on a tax credit called Recovery Rebate Credit, according to Jackson Hewitt, a tax preparation service. The tax authorities say that the Credit for recovery discount is intended for people who missed the stimulus payment or did not receive the full amount for which they are eligible. The IRS has information about the suitability of the stimulus posted on her website.
So, how can people get that money back? They must file a 2021 tax return and state how much incentive money they have received.
The Center for Fiscal and Policy Priorities explains: there is a space on the tax form for the Recovery Rebate Credit. This is the part of the worksheet that compares how much money a person has received with how much they should have received.
From there, the federal government will apply any missing money to your taxes or give it to you as part of a refund.
But what about people who had a higher income in 2021 and are now ineligible for the incentive benefit they have already received? The IRS says they do not have to pay back the difference.
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