Tax filers are confused about whether they should be paying taxes on their stimulus check benefits. The tax code declares that all income is taxable, whatever the source. But the IRS has made an exception in the case of stimulus check payments.
The amount received from the federal administration should be mentioned in the income tax returns to be submitted. But it is free from taxation. So you do not pay taxes on your stimulus check income, though a person reading the tax code may be confused about the rule.
The third stimulus check has been granted by the federal administration. Thus, the payment is not considered income as per the law. The payment is instead an advance check on your tax credit. And credits aren’t taxable income.
The federal administration has clearly declared that the third check is not to be added to the gross income for 2021. Thus neither will you include it in your gross pay, nor will you pay any tax on your Economic Impact Payment.
Claiming Your Stimulus Check By Filing Your Income Tax Return
Citizens who received unemployment benefits in 2021 have by now received Form 1099-G. the form mentions the amount sent and also the amount held back for taxes.
Such citizens are obliged to pay income tax on the funds. Whether you are also liable for state tax on this income depends on your resident state.
Individual states have also sent out checks of varying amounts to different groups of individuals. The income criteria also differ depending on the state you reside in.
These state stimulus checks are funded by a budget surplus in several states. The state administrations have also used funds received from the federal administration to fight the pandemic. Many of these funds have been one-off payments and have been adjusted against state tax returns.
