Here's what you need to do when you file this year.
Did you receive stimulus checks in 2020? As a response to COVID-19, many Americans deposited two stimulus checks as part of the CARES Act, passed by Congress in March of 2020. These payments were sent in two separate installments, which varied according to your income and whether you had dependents.
Because these payments from the federal government are unprecedented, that can lead to questions about how to handle them on your 2020 taxes, particularly if you've had a baby this year. You will need to cite the full amount of any stimulus money you received, but perhaps not for the reasons you think.
Will the stimulus payments be taxed?
No. This money does not count as taxable income and will not impact your tax return (due on April 15, 2021). In fact, it's not "income" at all. The stimulus checks were technically tax credits, like the Child Tax Credit, paid in advance. (Think of them as tax refunds you got early.)
You will need to cite the amount received, but as you gather your receipts and W2s to file 2020 taxes, you'll need to include two important forms this year: IRS notices 1444 and 1444-B. These verify the amount of coronavirus stimulus money you received.
(This also goes for the 2021 stimulus passed by Congress in early March.)
Did you receive all the stimulus money you had coming?
The reason you need to include the stimulus check information on your return is actually to protect your wallet: if you didn't receive your checks in full (or at all), your 2020 tax return is your opportunity to file for the Recovery Rebate Credit and recoup that missing stimulus money.
How much was the first stimulus check?
As part of the CARES Act, the first stimulus checks were mailed in April of 2020 as paper checks or sent via direct deposit into your bank account. Depending on your income, the amounts topped out at $1,200 per person (with an extra $500 per dependent).
How much was the second stimulus check?
Later in 2020, Congress approved a second economic relief bill and another round of stimulus check payments began sending out as early as December. This payment maxed out at $600 per person, plus another $600 for each child dependent who qualified.
Double check to make sure you received the full amounts for both checks, and either notify your tax preparer or fill out the Recovery Rebate Credit forms to make a retroactive claim now.
Did you have a baby in 2020?
If your baby did not receive both stimulus checks (for a total of $1,100), you're also entitled to submit the Recovery Rebate Credit. If you missed out on these checks earlier this year, it's because the IRS used 2019 returns to automatically send out payments.