Will I get a stimulus check if I owe taxes? Here are the rules


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  • Your third stimulus check cannot be withdrawn or reduced if you owe back taxes.
  • It is also protected against federal and state debts, such as overdue child support.
  • The rules are slightly different when you claim previous stimulus checks as recovery discount credit.
  • Calculate your third stimulus check payment »

If you are eligible for third dunning check, you don’t have to worry about it being used to cover back taxes.

The IRS began making cash payments, worth up to $ 1,400 per taxpayer, plus a surcharge for dependents, to millions of bank accounts on March 12. Another batch of payments will be deposited on March 24. Paper checks and debit cards are mailed to people who have not provided the IRS with direct deposit information.

To get your third stimulus check, you must have filed a 2019 or 2020 income tax return or used the non-filer tool last year to submit personal information. You can also get paid if you are a federal benefit recipient who has not filed a tax return.

Will I receive a stimulus check if I owe taxes?

As part of the US bailout, which authorized the latest round of dunning checks, payments are protected from any set-off. This means that you will get the full amount you are entitled to even if you have past due federal or state debts, such as child support, or if you owe taxes from previous years.

But your check won’t be protected against non-government debt, like medical bills or a credit card default. Once the money arrives in your bank account, creditors may be able to seize it.

In most states, creditors can access bank accounts through a court order to settle their debts. Several groups of consumers and banking businesses signed a letter to Congress on March 8 lobby for legislation to protect the latest round of stimulus checks from this type of garnishment.

The recovery rebate credit also cannot be used if you owe federal taxes.

The first and second rounds of stimulus checks – authorized in March 2020 and December 2020 – were also protected from federal and state debt offsets, and even private debt collectors in some cases.

Unfortunately, the same protections do not apply when these payments are claimed as a tax credit on your 2020 return (this is called the recovery discount credit). Remember that you can only apply for the credit if you are missing a stimulus check you qualify for, or you received too little based on your income and tax situation in 2020.

The bad news: Your stimulus tax credit can be used to set off state or federal debts, such as overdue child support (you will receive a letter notifying you before this happens). Erin Collins, National Taxpayer Lawyer, said in a blog post that this creates an inconsistency between the way the payments were treated at the time of the initial disbursement and the way they are treated when they are claimed in the tax returns. Collins said she hopes the IRS will fix the disparity, but those are the rules for now.

The good news: Your credit can not be used to offset federal taxes you owe for previous years, as directed published by IRS on March 18. However, if you owe taxes for 2020, the credit amount will go towards reducing that bill (this is usually a good thing – you will owe less money). For example, if you have a $ 1,000 tax bill after preparing your 2020 return and you qualify for a $ 600 recovery refund credit, your tax bill will be $ 400.

Here is an overview of the debts that your stimulus checks can and cannot be used for:

* Federal student loan debt collections have been suspended until September 30, 2021

** While private collection agents cannot enter your tax refund directly with the IRS, they can access the bank account your refund is deposited into

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