The 2021 federal tax filing deadline is still a few months away, but the Internal Revenue Service is already pushing taxpayers to get a head start on preparing their respective returns. 

The tax agency also noted that the returns for this year could potentially be more complex because of the stimulus check approved last March via the American Rescue Plan and the ongoing child tax credit payments, which give a $250 or a $300 payment per child each month through the end of this year. 

Stimulus Check Taxes  

As for the $1,400 stimulus checks, according to the IRS, individuals who received the direct payments won’t be on the hook for any future taxes. 

“No, the payment is not income and taxpayers will not owe tax on it. The payment will not reduce a taxpayer’s refund or increase the amount they owe when they file their 2020 or 2021 tax return next year,” the IRS states on its website. 

“A payment also will not affect income for purposes of determining eligibility for federal government assistance or benefit programs,” according to the IRS. 

Those people who didn’t receive the Economic Impact Payment should take note that fewer Americans were deemed eligible for these particular checks compared to the first two rounds.  

Individuals who earn as much as $75,000 in adjusted gross income (AGI), or couples making $150,000—in addition to their children or adult dependents—qualify for the full $1,400 per individual. Single parents with at least one dependent who earn $112,500 or less also qualify for the full amount. But individuals with an income of $80,000, or a couple with $160,000, will receive nothing.  

However, “individuals who didn’t qualify for the third Economic Impact Payment or did not receive the full amount may be eligible for the Recovery Rebate Credit based on their 2021 tax information. They’ll need to file a 2021 tax return, even if they don’t usually file, to claim the credit,” the IRS writes. 

CTC Tax Rules 

The child tax credit payments, however, might be trickier come tax time. 

“In January 2022, the IRS will send Letter 6419 with the total amount of advance Child Tax Credit payments taxpayers received in 2021,” the agency writes. “People should keep this and any other IRS letters about advance Child Tax Credit payments with their tax records.” 

The federal government is directed under President Joe Biden’s stimulus legislation to issue advance payments of the credit in periodic installments. Since these payments are largely based on the tax agency’s estimates on available data—such as income, marital status, and number and age of qualifying dependent children—there could potentially be outdated or inaccurate data that trigger an overpayment of the funds. 

To avoid such a precarious situation, some parents already have opted out of the monthly checks. Those people who are taking this particular route could potentially be eligible to collect a one-time lump sum during the upcoming tax season. 

Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn. 

Image: Reuters