At tax time, what does NJ need to know about the 2021 COVID stimulus?
The new year may have just begun, but Tuesday marks three months until 2021 tax returns must be filed.
With 2022 already bringing changes to how the Child Tax Credit is applied, New Jerseyans may be wondering about another wrinkle in the tax filing process: their COVID-19 stimulus, or Economic Impact Payment.
The 2021 stimulus authorized by President Joe Biden is no different with regard to taxes than the two rounds paid out under President Donald Trump in 2020, according to Nicole DeRosa, senior tax manager for Florham Park-based Wiss & Co. and chairwoman of the Emerging Leaders Council for the New Jersey Society of Certified Public Accountants.
"Round three was essentially the same. It was an advance tax credit," DeRosa said. "So the income that was received is not viewed as taxable income to the individuals who received a stimulus payment."
That may seem clear-cut, but DeRosa said that if a person's income level appreciably changed last year compared to 2020, they may have to "true up" or "true down" what they report to the Internal Revenue Service.
"Depending on somebody's different facts and circumstances, maybe they made a lot more money than the IRS had based their stimulus off of, so they would not be entitled to any more of a stimulus," she said, adding that if they made less money than estimated, a Recovery Rebate Credit could be due them, and would be added to their return.
Similar to what DeRosa told New Jersey 101.5 about accounting for the Child Tax Credit, she said New Jersey taxpayers must make sure to dot their i's and cross their t's in the next few months, or face significant delays in receiving any potential refund.
"The IRS knows, on their record, how much they paid out to each person or by Social Security number, and if a return comes in and there's not a match, you won't get your money back anytime soon," DeRosa said.
Also, she said, continue to keep an eye out for official IRS documentation.
That was Letter 6419 for the Child Tax Credit, and there's another four-digit number to remember for the stimulus.
The document will tell a taxpayer exactly what they need to know about the amount of money they were owed and awarded, according to DeRosa.
"Same goes for the Economic Impact Payment," she said. "There's also Notice 1444 that the IRS will be sending out to taxpayers, telling them, 'Hey, this is the amount of economic payment that you received."