Personal Finance

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6 stimulus check pitfalls to know about during tax season

Millions of people have to claim missing stimulus check money on their taxes this year. But now everything's changed. Here's the story.

Stimulus check rules can get complicated, fast.

Sarah Tew/CNET

If the IRS still owes you stimulus money from the first two checks, you're among the millions of Americans who will have to claim the payment on their 2020 taxes this year. Whether it's the first or second stimulus payment you never received, you'll need to file a Recovery Rebate Credit when you file your tax return.

The IRS is accepting tax returns until April 15 -- unless the request to push Tax Day back is approved, or if you file an individual tax extension. If you file your taxes online, you can begin tracking the status of your tax refund 24 hours later. Do note that the IRS is asking taxpayers to avoid filing paper returns this year, if possible, to keep the process moving quickly. 

While upfront it seems simple, there are major ways the rules have changed, between the IRS sending out checks proactively and you having to claim your payment as part of a tax rebate. These circumstances could block you from getting your missing stimulus money on time, or prevent you from getting it at all. Here's what you need to know right now about exceptions that could trip up your claim. (And here are details about a third stimulus check for up to $1,400, including how soon yours could come, and how tax season could affect your third check total.) This story was recently updated.

The IRS has to process your taxes before you get any money 

Once you file your taxes with your Recovery Rebate Credit form, you'll have to wait for the IRS to process your tax refund. If you file for the credit and are owed money, you'll either see the amount of your tax refund increased or the amount of tax you owe reduced, depending on the amount of stimulus money you're eligible to receive

The IRS says it issues most tax refunds within 21 days, but many people will get theirs far sooner. We've got several different timelines for when you can expect your tax refund to arrive based on your situation. 

Video: Stimulus check No. 3: What you need to know

Recovery Rebate Credit claims take extra work. Especially if you're a nonfiler

Unfortunately, your missing stimulus money won't just show up on your tax return. You have to file a form to claim your money as a Recovery Rebate Credit. We've got full instructions on how to file for a Recovery Rebate Credit here, but the basics are: 

1. Confirm your payment status online through the IRS

2. When you file your 2020 tax return (check out our list of the best tax software), claim your Recovery Rebate Credit on 2020 Form 1040 or Form 1040-SR. The IRS offers Recovery Rebate Credit instructions to help you work out if you're missing a payment and for how much.

3. If you're filing for a partial check rebate, you'll need the IRS' calculated amount from the letter the IRS sent confirming your payment. This was called Notice 1444 for the first payment and Notice 1444-B for the second payment.

If you don't usually have to file taxes -- for example, if you receive SSI or SSDI, or if you're retired -- you should have automatically received a first and second stimulus check. But if your check never arrived (there were lots of reasons why this could have happened), you will still have to file a 2020 tax return this year and claim your Recovery Rebate Credit to claim your missing stimulus money. We've got instructions on how nonfilers can claim this credit.

Filing a tax extension? Prepare to wait longer for your money

You can file your tax return anytime before the April 15 deadline. However, if you need more time, you can file for an extension with the IRS, which would move your deadline to Oct. 15. 

You can still claim missing stimulus money through a Recovery Rebate Credit if you file your taxes with an extension, but keep in mind that this means your refund will arrive correspondingly later. For example, if you wait until Oct. 15 to claim it, the earliest you would get the money is Oct. 22. 

You may not get a check at all if you owe money to the IRS

Under the CARES Act from March 2020, your first stimulus check could be seized by state and federal agencies to cover past-due child support. That rule changed with the second stimulus check, which couldn't be taken if you owed money for child support

However, these rules are different when you file for missing stimulus money on your 2020 tax return. For certain outstanding debts -- including past-due child support and unpaid student loans -- the IRS can withhold some or all of your unpaid stimulus payment issued as a Recovery Rebate Credit when you file your taxes. An independent taxpayer advocacy group within the IRS is working with the agency to address this issue. (Find out more about your stimulus check rights.)

If you do owe the IRS money, you may be wondering: Should I bother filing for a Recovery Rebate Credit if the agency is going to take my money away? It likely still makes sense for you to do so, because it will help you pay down your debt -- even if you won't be able to access those funds as the laws intended. 

The IRS may be able to garnish some of your stimulus money, if you claim it on your tax return.

Sarah Tew/CNET

Your stimulus check could be garnished, even if you're claiming it due to an error made by the IRS

There were lots of reasons why you may not have received your first or second stimulus check even though you were eligible, including IRS errors, closed bank accounts and changed addresses. Unfortunately, even if there was an IRS error, if you did not get the money as a direct deposit, paper check or EIP card, the IRS can claim it to cover your debts when you file for it on your tax return. 

This is due to a limitation that subjects Recovery Rebate Credits to regular rules for unpaid federal taxes and certain other debts, so the credit is treated differently from the stimulus checks paid up front. 

Any error involving your third check means you'll have to wait until tax season next year to claim missing money

Much like the first and second checks, you'll be able to claim any missing money from the third check owed to you or your dependents during tax season next year, 2022. That's a long way away. The best thing to do right now to make sure your third check does arrive on time is to file your tax return as soon as possible

4 ways you could get your refund faster 

If you're filing for a Recovery Rebate Credit, the IRS probably sent you a letter last fall. If you saved the letter, which the IRS suggested, you'll need the amount of the payment listed in the letter when you file this year.

If you're able to file your taxes before the April 15 deadline, it can mean quicker turnaround for your refund, if one is due to you. In addition, any potential missing stimulus payments are also tied to your taxes this year, so filing sooner would mean a tax refund as well as a stimulus check in one payment. It's also more likely you'll get your full payment with the new stimulus check in 2021 because the IRS would base your third stimulus check on your 2019 and 2020 taxes, according to the latest proposal which isn't law yet.

If you don't have direct deposit set up with the IRS, setting it up when you file your taxes can mean seeing your refund sooner -- especially if you combine it with electronic filing. The IRS has actually asked taxpayers to avoid filing paper returns if possible as well, to safeguard against further delays.

If you've moved recently or you're planning to move, you'll need to inform the USPS and the IRS of your new address, even if it's temporary. Keeping your address information up to date helps to ensure that you receive all your stimulus checks -- the potentially missing ones too -- as well as your tax refund. 

For more details, check out everything we know so far about a third stimulus check, when it might arrive and how much money you could get

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