Everything you need to know about your stimulus check and taxes this year

If you’ve received a stimulus check (or two) over the past year, you may be wondering how to handle that come tax time next month.

We had the same question and since we’re not accounting pros, we hit up Fisher, P.A. to give us the answers.

ICYMI: Fisher, P.A. is a public accounting firm led by Emily A. Fisher, CPA. They offer accounting and advising services for both individuals and businesses. Plus, their office is located in a century-old historic Dilworth home. 

We spoke with Kristen Shiring, CPA, Tax Manager & Business Advisor at Fisher, P.A. to get the lowdown on how the federal stimulus checks could affect this year’s taxes.

Do I have to pay taxes on the stimulus money I received last year?

Nope. Shiring explained that “there’s no requirement to pay taxes on federal stimulus money and no requirement to pay the money back.”

You will need to provide stimulus amounts you received to your tax preparer, said Shiring. This is just for financial reporting purposes.

Additionally, if you received stimulus money for dependents in your household, you don’t have to pay taxes on that money either.

I didn’t get a stimulus check last year but now I’m eligible. How do I apply for the rebate?

“If you’re now eligible, you can apply by filling out a worksheet on your tax return,” says Shiring. “It’s called the Recovery Rebate Credit.”

Shiring explains that if you receive the credit, it will be included in your tax refund. And if you owe money, the stimulus money would simply decrease the amount of taxes that you owe.

What if I was supposed to get a stimulus check but never received it?

“If you believe you were supposed to receive a check but never did, you can work with the IRS to do a payment trace and figure out what happened to the check or direct deposit,” says Shiring. “Definitely don’t report it on your taxes, if you didn’t receive it.”

For more information on requesting an IRS payment trace visit this page.

Will there be a tax extension for individuals like there was last year due to the pandemic?

“As of right now, the IRS has announced an extension for individual federal income tax returns to May 17.”

However, Shiring explains that if you need an extension it’s easy to file for one. “It’s not a red flag for the IRS and you won’t get penalized for filing for an extension,” she says. “We do it as a courtesy for many of our clients.”

If you file for an extension, the deadline for individuals is October 15.

What happens if I lost my job and had to file for unemployment last year?

2020 brought lots of job loss for Charlotteans. Many people were furloughed or laid off and applied for unemployment compensation.

Unlike the stimulus checks, The first $10,200 of unemployment may be excluded from taxable income on your federal return if your modified adjusted gross income was below a certain threshold. As of now, North Carolina is not allowing this exclusion and taxing all unemployment income.

Shiring explains that when an individual applies for unemployment, they are given an option to have taxes withheld from their checks to cover any tax liability on the front end.

However, if you received unemployment compensation and did not check the option to withhold, you’ll be responsible for paying those taxes on your 2020 income tax return.

Do you have any other helpful advice for individuals who get exceptionally sweaty about filing taxes?

“The earlier you file, the better,” says Shiring. “Basically the sooner you file, the sooner you can get your refund.”

Shiring also recommends sharing any major life events with your CPA. “Things like getting married, having children or buying a home can potentially offer you major tax deductions.”

More advice: Check out this story for additional tax tips for individuals ahead of this year’s tax season.

If you’re over trying to navigate taxes on your own, hire the pros at Fisher, P.A.

Own a business? Learn how Fisher, P.A. is helping transform Charlotte businesses through their accounting and business advising services.

The content was created in partnership with Fisher, P.A.