Know Your Rights With Your Stimulus Payment

Amidst all the turmoil of the last month, the second stimulus bill passed, and payments were issued. By now, you should have received your payment of up to $600 per child and adult in your family — assuming you are eligible.

It’s critical to know your rights with the stimulus payments. Take the time to scan this post for any areas that may apply to you. We will cover all your burning questions about how the stimulus payments affect your taxes, whether they can be garnished, how they impact child support (and vice versa), and what to do if you suspect the IRS made a mistake.

First, have you received your payment?

If you haven’t seen your stimulus payment arrive yet, make sure you’re looking everywhere it may show up:

  • Direct deposit in your bank account
  • A check in the mail
  • EIP (debit card) payment, also by mail

In some cases, you’ll have to claim the money on your tax return in order to receive your stimulus payment. It’s helpful to know the nuances. You can track the status of your stimulus payment online via the IRS Get My Payment tool.

Know how taxes will impact your stimulus payment

Stimulus checks are not considered taxable income. For this reason, you do not have to pay taxes on either stimulus check.

If you did not receive the stimulus, you may still be eligible for the Recovery Rebate Credit when you file your taxes. Stimulus payments are based on your 2019 income. That means that if you met certain conditions in 2020, it could change your status and make you eligible:

  • A loss of income
  • You were newly independent
  • Additional dependents

In these cases, you might receive additional money when you file your 2020 tax return.

Tip: For more information on how to file a tax return to receive stimulus funds you are due, read Resources to Help You File Your Taxes for Free and Maximize Your Tax Refund.

What to know about debt collection

Stimulus money is yours. Don’t give it away to a scam or a debt collector who is pressuring you to pass the cash along. Here’s what you need to know about debt collection when it comes to your stimulus payment.

Private debt collectors, including student loan servicers and landlords, cannot withhold or claim funds from your stimulus payment.

Similarly, if you owe the state or government money for any reason, it cannot be garnished from your stimulus payment. (Read more about this straight from the IRS.) However, note that these funds can be withheld from your potential tax credit, once you file your taxes.

Banks also have the right to use deposited stimulus funds to cover overdraft fees — although not all banks are choosing to do so. If this happens to you, contact your bank and request a temporary waiver; they don’t have to grant it, but they may.

It’s still a smart financial practice to be aware of any judgments against you. Here is how to check:

  • Download your credit report
  • Check to see if you have a federal tax lien by calling the IRS: 1-800-913-6050 (or ask your tax preparer to call on your behalf)
  • Check with your state tax board or county recorder about other potential liens

While it may be extra challenging right now, paying your bills and taxes on time, to the best of your ability, will help prevent future liens.

How child support impacts your stimulus payment

When the first round of stimulus checks was released, the IRS sent “catchup payments” to any spouse who had filed for past-due child support, deducting that amount from the stimulus payments of the spouse who owed. This policy has changed for the second stimulus payment. Your past-due child support cannot be garnished (deducted) from your second stimulus check.

What to do if you suspect the IRS made a mistake

Sometimes, the IRS makes mistakes. Recently, the IRS goofed on the stimulus payments of millions of Americans who used tax preparers such as Turbo Tax, Jackson Hewitt, and H&R Block. This massive error left a lot of people wondering where their stimulus payments were. On January 10th, the IRS said that it is reissuing some payments that were sent to the wrong bank accounts.

This is a good reminder that it’s smart to regularly monitor your bank account for deposits and other activity.

Tip: As an alternative to IRS tools, there are plenty of calculators available to determine whether you should have received a stimulus payment, and for how much, including this one.

It’s important to note that it’s also possible for the IRS to mistakenly make a payment to someone who is not actually eligible. It happened in the first round of stimulus payments, and it probably happened in the second round as well. Read more about the circumstances where you might need to return your stimulus payment.

Protect your stimulus check

Stimulus payments are designed to help Americans with basic bills during a challenging time — putting food on the table or a roof over your head. It’s a good idea to prioritize that money for immediate necessities such as food, rent, mortgage, and utilities. If you do have debt, try to work out a payment plan with your creditors.

In addition to this thorough list of advice for how to protect your rights and your stimulus check, we invite you to read the other articles we’ve written on this subject:

And stay tuned for news of another stimulus check, which the Biden administration and lawmakers are working on right now.

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