3 Reasons the IRS May Ask You to Repay Your Stimulus Money

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  • The IRS will send you a letter if it determines you need to repay stimulus money you received.
  • The most likely reasons are mistakenly claiming a Recovery Rebate Credit, depositing a payment for a deceased person, or receiving a payment as a non-citizen or resident.
  • You won't need to repay money if your income changed and exceeded the income limits.

Not everyone got the correct amount of stimulus money, and if you received more than you should've, the IRS may want it back.

The three stimulus payments may be old news at this point, but the IRS is still catching up on overpayments. Those who received stimulus money they weren't eligible for may be required to pay it back.

Fortunately, most people likely got the correct amount and won't need to worry about this. If you received more than you should, it's a good idea to start preparing, and consider adding to your savings accounts, in case you get a letter from the IRS about it. Here are the three most common reasons you'd be required to repay stimulus money.

1. You mistakenly claimed a Recovery Rebate Credit

All the stimulus payments had income limits, and the amount people received was based on their most recent tax returns. If you missed a payment or got less than you should've, the IRS has provided the option of claiming a Recovery Rebate Credit on 2020 and 2021 tax returns.

This credit allows you to claim your stimulus money on your taxes. It will either lower the amount due if you owe taxes or get you a larger tax refund. However, if you miscalculate, the IRS will most likely contact you and require you to repay the credit.

Many people have gotten letters from the IRS about this, as these types of math errors are common. If you get one and you think it's incorrect, you can request a reassessment. Even if you do this, pay the required amount by the deadline. That way, you won't have to pay any additional interest or penalties if the decision doesn't go in your favor.

2. You received a payment for a deceased person

Receiving a stimulus check for a deceased loved one can be painful. It's also a confusing situation where you're not sure what to do with the money, especially if it's a joint payment for you and a deceased spouse.

If you deposited one of these payments, including a joint payment, you may be required to pay it back. For joint payments, you may need to pay back the portion that belonged to your spouse. It depends on when the person died and the round of stimulus payments they received.

When the IRS issued the first round of stimulus payments in 2020, it sent payments to about 1.1 million deceased people. It instructed the recipients to send those payments back.

For the second round (the $600 payments), stimulus money only needs to be repaid if the recipient died in 2019 or earlier. And for the third round (the $1,400 payments in 2021), stimulus money only needs to be repaid if the recipient died in 2020 or earlier.

3. You're not a U.S. citizen or resident

To qualify for the first and second stimulus payments, you had to be either a U.S. citizen or a resident alien who lives and works in the United States. Nonresident aliens didn't qualify.

The same rules applied for the third payment, with one change. Nonresident aliens who are part of a mixed family, meaning at least one member has a Social Security number, were able to receive the third round of stimulus payments.

If you didn't qualify based on any of those criteria, but the IRS mistakenly sent you a stimulus check anyway, you might need to repay it.

What if I earned too much money?

If your income increased past the thresholds for a stimulus payment, you may be wondering if you need to pay it back. For example, if you received the $1,400 stimulus based on income of $60,000 in 2020, but then you earned $85,000 in 2021, would you need to repay some of that third stimulus?

The answer is no. The IRS has made it clear that none of the stimulus payments need to be repaid for this reason, so there's nothing to worry about in this situation.

What to do next

If the IRS determines you need to repay stimulus money for any reason, it will send you a letter in the mail. It won't call you, email you, or contact you by any other method, but these are popular methods scammers use.

The letter will include the amount you need to pay and instructions on how to pay it. If you agree with it, make the payment, and you're done. If you don't, you can ask for a reassessment. Just make sure you follow the instructions and meet the deadline so you don't get charged any penalties.

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