After the pandemic negative effects, there were several measures carried out. They tried to cope with the financial situation of many American families. These stimulus cheques were a way to make up for the downturn of that moment. On the other hand, in the United States the Social Security payment system also works very well. Both types of cheques are very important in American society.
The situation at that time was really bad for many families and businesses. Thus, they had no option but to accept those payments. Luckily, Congress had already thought about it. So, they did not link stimulus cheques to tax payments.
Stimulus money is not income for the Internal Revenue Service. Therefore, you do not have to pay taxes for stimulus cheques. It is true that the IRS taxes any income you might get if you exceed the limits they set. But it is not the case for this.
What are these Stimulus cheques payments then?
These cheques are somehow advance payments of tax credits. Therefore, it cannot be taxable income. Bear in mind that a tax credit means they reduce 1 dollar for another dollar that you are liable to pay in taxes. Taxpayers ask for a tax credit once they file their tax returns. Sometimes this tax credit may reduce the amount of money you have to pay.
Other times, you may get a tax refund. As it was such an urgent situation, it was faster to send those payments as soon as possible. Waiting until the following tax return would have only made things worse. Though for some these stimulus cheques might not have seemed enough, it did benefit many American taxpayers.
Do I have to pay taxes on my Social Security cheque?
It all depends on the level of income we have, but usually this is not the case. When we start collecting our monthly Social Security cheque, our income level is much lower than when we are working with a salary.
In any case, when in doubt, it is much better to consult a financial advisor for help. What is almost certain is that any retiree who collects only a Social Security cheque will not have to pay taxes on his or her IRS return.
What did the IRS say about this?
According to IRS, these economic Impact Payments are not income. Thus, if you get this payment, you will not owe tax on it. Moreover, they add that they will neither increase nor reduce your refund. Many people worry it may affect their eligibility for some benefits or even for government assistance. However, they will not affect them at all.
Claiming any unpaid tax credits is also possible. It is more than likely that most citizens that claimed one got theirs by now. The IRS let those taxpayers who did not receive their tax credit claim in on their 2021 tax return. If you have not filed it yet, you will have to do it to get these stimulus cheque payments.