by Dana George | Updated July 25, 2021 - First published on Feb. 3, 2021
Many or all of the products here are from our partners. We may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
A small provision in the COVID-19 relief bill allows the IRS to withhold funds from your Recovery Rebate Credit.
If you owe back child support, have not received your stimulus check yet, and plan to claim it through the Recovery Rebate Credit on your 2020 tax return, you may be in for a surprise. That's because the government has the right to keep the Recovery Rebate of any taxpayer owing child support.
Tips and tricks from the experts delivered straight to your inbox that could help you save thousands of dollars. Sign up now for free access to our Personal Finance Boot Camp.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
To date, Americans have received either one or two stimulus checks. Anyone meeting the income criteria has practically been guaranteed a stimulus check per the wording of the COVID-19 stimulus bills. Even if you owed back taxes or some other type of government debt, you were still due stimulus money. When Congress wrote the second bill, it even specified that those owing money to a debt collector or in back child support were still eligible for a stimulus payment.
But this is where things get murky. One generally overlooked provision in the December stimulus bill (the one responsible for the current round of stimulus checks) gives the IRS permission to keep money. The bill says that if you owe child support, back taxes, or any government debt, the IRS has the right to collect on that debt by keeping your Recovery Rebate Credit.
Say you changed your bank account in 2020 and the IRS sent your stimulus check to your old bank. By law, that bank was required to return the funds to the IRS. Or, if you have moved since filing your last income tax return, it is possible that the IRS still has your old address on file and could not locate you.
If you did not receive your stimulus funds (or only received a partial payment for some reason), the next best way to receive those funds is to claim the Recovery Rebate Credit on your 2020 Form 1040 or 1040-SR. If you are due a refund, the IRS will add the stimulus funds to the amount due. If you owe money on your 2020 taxes, the funds will offset the amount owed. For example, if you owe $2,000 and are due $600 in stimulus funds, the amount due will become $1,400.
But that's only if you don't owe child support, taxes, or any other government debt. Because of the provision in the latest stimulus bill, any funds due to you through the Recovery Rebate Credit will be kept by the IRS to cover those debts.
If you owe money to a debt collector, your bank, or any other lender, they may also make a claim on stimulus funds you attempt to recover through a Recovery Rebate. Of course, they would have to know that you did not receive your stimulus check. It's a bit of a stretch to imagine that banks are tracking whose payments they returned to the IRS and cross-checking those names against customers who owe them money. It's even more of a stretch to imagine that a debt collector would know that you've claimed funds through a Recovery Rebate. Still, it's essential to understand that it could happen and plan accordingly.
Suppose you owe back child support or are in debt to a creditor or the government. In that case, you're likely feeling financial stress -- particularly if COVID-19 has prevented you from earning enough money to cover your obligations. If you are in financial trouble, there are resources available to help.
If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.