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Your third stimulus check can be seized. Here's what to know

Bad news: The new stimulus bill doesn't have the same protections to prevent your third payment from being garnished for a past-due payment as with the second check. We'll explain what that means for you.

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Who can garnish your stimulus check? We'll tell you.

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For millions of people, third stimulus checks have already been delivered. But for others, they may never see all of the money that gets direct-deposited into their bank accounts. Unlike the second stimulus check, the new stimulus bill doesn't have the same protections against your $1,400 check being seized by debt collectors.

If you're waiting on your check to arrive, you're likely wondering many things: Can my third check be garnished to pay overdue child support? Can states, banks, creditors or my landlord take my money to cover an outstanding debt? If I claim missing money from the first or second stimulus checks on my 2020 tax return, can that get taken too? Will my third stimulus check be taxed? What happens if the IRS sends me too much money by accident

We'll help provide you with all the information you need so you can prepare before the third payment hits your bank account -- or before the IRS processes any missing stimulus money on your tax return. For example, tracking your stimulus check can help you determine when it'll be directly deposited into your account. CNET also has guides to stimulus checks as they relate to SSI and SSDI, adults who are over age 65 or retired and if you pay or receive child support. This story was updated recently. 

Yes, your third check might be seized to pay certain debts. Here's why

Under the bill governing the second stimulus check, your funds could not be garnished to pay debts like child support, banks or private creditors. However, part of this rule changed with the third check. 

The bill authorizing the third payout was pushed through using a process called budget reconciliation. Congressional Democrats used this legislative tool to more quickly pass the new COVID-19 relief bill and the third stimulus check that comes with it, since it allowed them to pass it with fewer votes. But because this process was used, the third checks aren't protected from all garnishment, although lawmakers are moving to fix this now. 

There are three types of unpaid debt that could be paid through garnishment: unpaid IRS tax debt, other government debt like child support payments or private debt, according to Garrett Watson, a senior policy analyst at the Tax Foundation. Your third stimulus payment will be protected from outstanding tax debt and child support, but not from private debts, such as debt accrued due to a civil judgment, ranging from civil damages to consumer debt in default, Watson said. 

Several banking groups sent a letter to Congress on March 9 asking lawmakers to pass stand-alone legislation to prevent the third check from being garnished for private debts. 

Your third stimulus payment can't be seized to pay child support

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 for the second stimulus check, which couldn't be taken if you owe money for child support. And like the second check, your third check cannot be taken to pay overdue child support. 

According to the text of the bill, payments will not be subject to reduction or offset for past-due federal or state debts, or by other assessed federal taxes that would otherwise be subject to collection. However, if you end up having any money missing from your third check and have to claim it on your tax return next year, that money could be subject to garnishment (more below). The best thing to do is to file your 2020 tax return as soon as possible, so the IRS has your most recent information on file. 

People with children will benefit from other aspects of the bill outside of the third stimulus check. For example, updates to the Child Tax Credit increase the existing amount to as much as $3,600 per child. There are also some other tax breaks to take advantage of, including for child care. 

Your second check couldn't be taken to pay overdue child support. But your tax refund and Recovery Rebate Credit can be

Again, under the bill governing the second stimulus check, your payment couldn't be taken if you owed money for child support -- a shift that's been widely understood across federal and state agencies.

However, these rules have not necessarily extended to the situation of filing for missing stimulus check 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.

Here's everything to know about stimulus checks and child support

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Banks and creditors might be able to take your stimulus checks in this circumstance

With the first stimulus check, private banks and creditors were able to seize your payment to cover an outstanding debt. However, some states, such as California, issued orders forbidding banks and creditors from garnishing your stimulus check. With the second stimulus check, your payment was protected from bank garnishment and from private creditors and debt collectors, according to the text of the law. The third check is also supposed to be protected from bank garnishment, though not from private creditors and debt collectors. 

However, there's one major caveat here. Individual banks can decide whether they want to use your stimulus direct deposit payment to cover overdraft fees, according to a New York Times report. This is because, for most people, their stimulus check is deposited into the same bank account where they also receive tax refunds

Although for the second check large US banks including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said they would temporarily zero out their customers' negative balances so that they could access their stimulus money, some regional and community banks still garnished that money to pay overdraft fees, or were considering customer requests on a case-by-case basis, according to the Times. If this has happened to you, you can try contacting your bank to ask for a temporary overdraft waiver, but it may not be granted. This is likely to be the case for a third check as well, Watson said. 

What about your tax return and claimed stimulus money? Federal law allows only state and federal government agencies to take your refund as payment toward a debt, not individual or private creditors. But again, this changes once you deposit your refund in your bank account, when private creditors may have access to those funds, depending on your state. 

Your stimulus payments won't be taxed, but there is one exception

The IRS doesn't consider stimulus payments to be income, which means you won't be taxed on your stimulus money. That also means a direct payment you get this year won't reduce your tax refund in 2021 or increase the amount you owe when you file your 2020 tax return. You also won't have to repay part of your stimulus check if you qualify for a lower amount in 2021. If you didn't receive everything you were owed this year, you can claim your full stimulus check amount as a Recovery Rebate Credit on your 2020 federal income tax return when you file this month (more on that below).

However, another big caveat here: If you are filing for any missing stimulus money as a Recovery Rebate Credit on your tax return this year, the IRS can potentially garnish that money to pay for any back taxes you owe. Again, an independent taxpayer advocacy group within the IRS is working with the agency to address this issue to protect those funds for vulnerable taxpayers. 

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Is the stimulus money really yours? That depends.

Sarah Tew/CNET

You don't have to file a tax return to qualify for a third stimulus check, but...

Though taxes do play a role in determining stimulus check eligibility, you don't need to have filed a tax return to qualify for a check. If you're over age 65, for example, and receive Supplemental Security Income or Social Security Disability Insurance, you could still qualify for a first, second and third stimulus check. But in some cases, you would have needed to take an extra step, and you will now if you're still waiting on your full payment. If you didn't receive some or all of the money you were entitled to, people in this group, termed nonfilers, will have to file a tax return to receive any missing stimulus payment

The best thing to do to ensure that the IRS has your information on file and potentially speed up how fast you get your third check is to file a 2020 tax return now

Landlords and nursing homes can't demand you to use your stimulus check money to pay them (most of the time) 

The CARES Act prevented landlords from demanding you give them your stimulus check to make a rent payment. Nursing homes and care facilities also cannot ask you to hand over your stimulus check money to meet a payment, according to the IRS. The second stimulus check followed the same rules. If someone pressures you or threatens you with eviction in exchange for your payment, make sure that you know your rights in regard to stimulus checks and to the eviction moratorium that lasts through March 31. 

These rules generally hold for the third payment as well. However, if a private creditor or debt collector obtained a judgement against you, they could garnish your payment, according to Watson.

Your stimulus check can't be garnished to pay an overdue car payment

Likewise, people who are worried about car repossession if they can't make a payment are in most cases not obligated to hand over stimulus money, unless it falls under one of the exceptions below. Here's what we know about missed car payments during the coronavirus pandemic.

If your first or second stimulus check never arrived, you can claim a rebate when you file your taxes

If you were eligible for a first or second stimulus check but still haven't received a direct deposit, check or prepaid EIP debit card from the IRS, you may have mistakenly been overlooked, or you may have a problem that you need to resolve. Certain groups who were eligible for that first payment, such as some older adults, retirees, SSDI recipients, noncitizens and those who are incarcerated, can file a claim for payment.

Even if you don't typically file taxes, you'll have to submit a 2020 tax return (the deadline has been extended to May 17) using a 2020 Form 1040 or 1040SR to claim your money. This credit would either increase the amount of your tax refund or lower the amount of the tax you need to pay by the amount of stimulus money you're still owed. 

Again, just be aware that if you do file for a Recovery Rebate Credit and owe any back taxes, the IRS may garnish that money to pay those debts.

If you got a letter from the IRS confirming either your first or second payment, but never actually got the money, you can try filing a Payment Trace through the IRS to track it down

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If you owe child support, all or part of your stimulus check could be used to cover the expense.

Sarah Tew/CNET

Incarcerated people are eligibly for all 3 stimulus checks

Though there was a lot of confusion about this at first, people who are in prison and jail are eligible to qualify for the first stimulus check of up to $1,200 per adult, as well as the second check of up to $600 and the third check of up to $1,400. A ruling this fall from a federal judge in California required the IRS to contact those incarcerated who can file a claim for a stimulus check. As with others who are missing any of the payments, you'll need to fill out 2020 Form 1040 or 1040-SR to claim either the first or second check.

Can the IRS make you send back your stimulus check money?

The IRS said a payment you get this year won't reduce your tax refund in 2021 or increase the amount you owe when you file your 2020 tax return. You also won't have to repay a stimulus payment if you qualify for a lower amount in 2021. (Here's how your income taxes influence your payment.)

However, if the IRS thinks it mistakenly sent you more stimulus check money than you qualify for, or if you received money in your check for someone who's died, the agency expects you to return the payment.