Will I Get a Stimulus Check If I Owe Taxes? (And Other FAQs)

Erica Gellerman, CPA

Reviewed by

January 4, 2021

This article is Tax Professional approved

One of the banner headlines coming out of the CARES Act was the one-time stimulus payment of $1,200 per person (and $500 per qualifying child).

The Tax Foundation estimated that the average household will receive a payment of $1,523. This can be a big boost at a time when so many people need it most.

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With the signing of a new bill on December 27 came a new stimulus package with $600 stimulus checks. These checks have the same rules as the original stimulus check.

But what happens if your business owes taxes that you haven’t yet paid — will you still get your stimulus check?

Most businesses are structured as pass-through entities, meaning any income or loss flows through to your personal tax return. If you haven’t paid enough taxes on your business income, you pay them when you file your personal tax return. How will that tax due affect your stimulus payment?

Will I get a stimulus check if I owe taxes?

Yes! If you owe taxes, you can still count on receiving your money. The IRS is not going to use the stimulus check to offset what you owe the government. According to the IRS, there is only one reason your money will be held back: if you owe past-due child support.

In that situation, you’ll get a notice from the Bureau of Fiscal Service letting you know that a portion (or possibly all) of your stimulus payment will go toward your past-due child support.

Is the stimulus payment considered taxable income?

No, your stimulus check is not considered taxable income. This payment won’t reduce your refund or increase the amount that you owe when you file your 2020 tax return.

The stimulus payment is actually a refundable tax credit. This means that the government gives you money, even if you didn’t pay anything in taxes.

How much will I get?

Normally, you get money from any tax credits when you file your tax return in April. Because of the COVID-19 emergency, the government wants you to be able to use the money now when you need it and they don’t want you to wait until next April to receive it.

So they made this a tax credit that you can get immediately, as long as your income is below the qualifying threshold:

People earning an income of $75,000 and under (or $150,000 and under if married and filing jointly) will receive a stimulus payment of $1,200 for individuals (or $2,400 for married couples
People earning more than $75,000 but less than $99,000 (or more than $150,000 but less than $198,000 for a married couple filing jointly) will get a reduced stimulus payment.
People who receive the stimulus payment will also receive up to $500 per qualifying child

Because we don’t know what our 2020 income will be yet, the IRS is using our 2019 or 2018 tax return to determine who gets the credit and how much they receive.

But don’t worry: the IRS is not going to ask for the money back once you file your 2020 taxes. If you automatically receive a stimulus payment based on your 2019 income that is more than what you’d receive if it was calculated using your 2020 income, you won’t have to repay the government (you can learn more here).

Can you use your stimulus payment to pay your taxes?

Yes! If you want to. Once you get your stimulus check, you can turn around and use it to pay your taxes.

But depending on your situation, it might be better to hold off on using your stimulus payment to pay your 2019 tax bill. The IRS has given taxpayers a three-month extension to pay and file taxes, so if you have a more pressing need, like food or medical treatment, it might be better to use your stimulus money for that now, and wait until July to pay your taxes.

How can you check on your stimulus payment status?

Millions of people started receiving their stimulus payments via direct deposit the week of April 15th. If you have yet to receive your payment, you can check on the status using the new “Get My Payment” application. You can also use that to provide your direct deposit information to avoid having to wait for your check to be mailed.

Approximately 15 days after your stimulus payment has been sent (either by direct deposit or by check) the IRS will mail a letter to your last known address confirming the payment.

Bottom line when it comes to getting your money: if you qualify for the stimulus payment, you can count on receiving it even if you owe the IRS money.

More COVID-19 resources

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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