You, like many other taxpayers in the US, may have received a letter from the IRS after receiving your economic impact stimulus payment. Your first reaction when seeing the unopened letter is OMG … what did I do wrong?!! Your second reaction after opening the letter is what do I do with this?!
Well, rest easy … this is a “happy” letter from the IRS … you did nothing wrong. It’s not often we get good news from the IRS, so I hope you enjoyed the moment. This letter, Notice 1444, was sent to you within 15 days of the IRS sending you and your immediate family your economic stimulus payment check, borne from the CARES Act enacted by Congress as a response to the COVID-19 issues. The letter documents the amount of stimulus payment received (up to $1200 for you and your spouse, if applicable) and $500 for each dependent under 16 living in your household).
So, what to do with this letter …
- Frame it – it’s not often you get good news from the IRS… Yay!
- Save the letter with the rest of your 2020 tax records.
- Trash it.
We, and the IRS, recommend Option 2 – save the letter and give to your tax preparer in 2021 for him or her to assist in the preparation of your 2020 income tax returns. If you opted for #1 or #3 above, all is not lost. While going a little too far in my opinion, if you chose to frame your letter, you can take a picture of your artwork with your smartphone and provide to your CPA. If you trashed the letter, just provide another form of documentation to your tax preparer showing the receipt of the payment (a bank statement for example)
Why do I want to provide this info to my tax preparer – I thought this was non-taxable income?
You are correct, the income is non-taxable. You do not include the amount received in your gross income and, therefore, you will not pay income tax on the stimulus payment. It will not reduce your refund or increase the amount you owe when you file your 2020 Federal income tax return. In addition, you are still eligible to claim any additional credit for which you are eligible when filing your 2020 income tax return. And, it will have no impact on income calculations when determining eligibility for federal government assistance or benefit programs. Currently, the IRS cannot correct or issue an additional payment at this time and will provide information on what actions you need to take with this letter when you file your 2020 tax return when they are available.
More questions … ?
See the Economic Impact Payment Information Center for questions and answers about your eligibility, payment amount and what to expect and when to expect it.
New news … ?
Currently, there is bipartisan support regarding a second wave of stimulus payments but is not yet enacted by law. The projected second wave stimulus payment would be $1200 per taxpayer and $500 benefit for each dependent child of all ages, including college students, as well as dependent adults with disabilities.
Sahar T. Clancy, CPA