Third Stimulus Payment effect on 2021 Tax Return
No, the federal government is not taxing the third stimulus check
The IRS says the third stimulus check from the federal government is not considered gross income and is therefore not taxable.
Author: Nate Hanson, Mauricio Chamberlin, Brandon Lewis
Published: 1:53 PM EST January 7, 2022
Updated: 3:27 PM EST January 10, 2022
With the beginning of a new year, some people have started thinking about the information they’ll need to file their taxes, especially considering the different economic policies that were put in place in 2021 – from the advance child tax credit to the third stimulus check.
The latter was on the mind of VERIFY viewer Kathy. She emailed to ask if the third stimulus check, which many people received in 2021, is being taxed by the federal government.
THE QUESTION
Is the federal government taxing the third stimulus check?
THE SOURCES
THE ANSWER
No, the federal government is not taxing 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 was enacted in March 2021. Individuals eligible for payments could receive up to $1,400, and married couples filing a joint return could receive up to $2,800. People could also get $1,400 for each qualifying dependent. As of late July 2021, the IRS said it had made more than 171 million payments.
For the millions of people who received that extra money, the IRS says it is not part of their gross incomes.
“Therefore, you will not include the third payment in your taxable income on your 2021 federal income tax return or pay income tax on the third payment,” the IRS says 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 the Recovery Rebate Credit, according to Jackson Hewitt, a tax preparation service. The IRS says the Recovery Rebate Credit is intended for people who missed the stimulus payment or didn’t receive the full amount they’re eligible for. The IRS has stimulus eligibility information posted on its website.
So, how can people recoup that money? They’ll have to file a 2021 tax return and report the amount of stimulus money they received.
The Center for Budget and Policy Priorities explains there’s 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 received with how much they should have gotten.
From there, the federal government will either apply any missing money to your taxes or give it to you as part of a refund.
But what about people whose income was higher in 2021 and now don’t qualify for the stimulus payment they already received? The IRS says they don’t have to pay back the difference.
More from VERIFY: No, a fourth stimulus check has not been passed