Have a second stimulus check or one on the way? Your rights may change - CNET

Who can garnish your stimulus check? We'll tell you.

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You have more rights with your second stimulus check than with your first. But a new wrinkle could actually peel back a layer, if you have to claim any amount of missing stimulus money as a credit on your 2020 taxes this year. In essence, one protection that doesn't extend to the situation with a rebate credit on your taxes could mean you won't get to keep your entire payment if you owe certain debts.

You may have other questions, too: Will you get taxed on your first or second stimulus check this year? Can states, banks, creditors or your landlord take your money to cover a debt? Could your second check be garnished to pay overdue child support? What if the IRS sent you too much money by accident? 

We've got all of the information you need, whether your received your new payment in the mail as a physical check or EIP card or as a direct deposit. (If you are still waiting for your check, here's how to track your stimulus check online and in the mail. And here's what we know so far about a potential third stimulus check, which could be $1,000 or $1,400, depending on the proposal. If you don't receive your check this is when it's time to start a payment trace. This story was updated recently. 

Your second check can't be taken away for overdue child support, but your Recovery Rebate Credit could be

Under the CARES Act from March 2020, stimulus money could be seized by state and federal agencies to cover past-due child support. That changed with the second stimulus check, which couldn't be taken if you owe money for child support, a shift that's been widely understood across federal and state agencies.

However, these rules have not necessarily extended to the situation of filing for missing stimulus check money. For certain outstanding debts -- including past-due child support and unpaid student loans -- the IRS can withhold some or all of your unpaid stimulus payment issued as a Recovery Rebate Credit when you file your taxes. An independent taxpayer advocacy group within the IRS is working with the agency to address this issue.

Here's everything to know about stimulus checks and child support. It isn't clear if garnishment rules would further change in a third stimulus check.

Banks and creditors can take your second stimulus payment with this one circumstance

With the first stimulus check, private banks and creditors were able to seize a payment to cover an outstanding debt. However, some states, such as California, issued orders forbidding banks and creditors from garnishing your stimulus check. With the second stimulus check, your payment is protected from bank garnishment and from private creditors and debt collectors, according to the text of the law. 

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However, there's one major caveat here. Individual banks can decide whether they want to use your stimulus direct deposit to cover overdraft fees, according to a New York Times report. This is because, for most people, their stimulus check is deposited into the same bank account where they also receive tax refunds. 

Though large US banks including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said they would temporarily zero out their customers' negative balances so that they can access their stimulus money, some regional and community banks are garnishing that money to pay overdraft fees, or are considering customer requests on a case-by-case basis, according to the Times. If this has happened to you, you can try contacting your bank to ask for a temporary overdraft waiver, but it may not be granted. 

No, the government will not tax either of your stimulus checks

The IRS doesn't consider stimulus payments to be income, which means you won't be taxed on your stimulus money, and the IRS won't garnish it to pay for any back taxes you owe. 

That also means a direct payment you get this year won't reduce your tax refund in 2021 or increase the amount you owe when you file your 2020 tax return. You also won't have to repay part of your stimulus check if you qualify for a lower amount in 2021. If you didn't receive everything you were owed this year, you can claim your full stimulus check amount as a Recovery Rebate Credit on your 2020 federal income tax return when you file next month (more on that below).

Is the stimulus money really yours? That depends.

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You aren't required to file taxes to qualify for a stimulus check, however...

Though taxes do play a role in determining stimulus check eligibility, you don't need to have filed a tax return to qualify for a check. If you're over age 65, for example, and receive Supplemental Security Income or Social Security Disability Insurance, you could still qualify for a stimulus check under the CARES Act as well as with the second check. But in some cases, you would have needed to take an extra step, and you will now if you want to be made whole. If you didn't receive some or all of the money you were entitled to, people in this group, termed nonfilers, will have to file a tax return to receive any missing stimulus payment. 

Landlords and nursing homes can't force you to use your stimulus money to pay them

The CARES Act prevented landlords from demanding you give them your stimulus check to make a rent payment. Nursing homes and care facilities also cannot ask you to hand over your stimulus check money to meet a payment, according to the IRS. 

The second stimulus check follows the same rules. If someone pressures you or threatens you with eviction in exchange for your payment, make sure you know your rights in regards to stimulus checks and to the eviction moratorium that lasts through Jan. 31. The $900 billion stimulus legislation includes rental assistance for states and cities. 

Your stimulus check can't be taken to pay a late car payment

Likewise, people who are worried about car repossession if they can't make a payment are in most cases not obligated to hand over stimulus money, unless it falls into an exception below. Here's what we know about missed car payments during the coronavirus pandemic.

If your first stimulus check never arrived, you should apply for a rebate

If you were eligible for a first check but still haven't received a direct deposit, check or prepaid EIP debit card from the IRS, you may have mistakenly been overlooked, or you may have a problem that you need to resolve. Certain groups who are eligible for that first payment, such as some older adults, retirees, SSDI recipients, noncitizens and those who are incarcerated, can file a claim for payment.

Even if you don't typically file taxes, you'll have to submit a 2020 tax return (the deadline for which is currently April 15) using a 2020 Form 1040 or 1040SR to claim your money. This credit would either increase the amount of your tax refund or lower the amount of the tax you need to pay by the amount of stimulus money you're still owed. 

If you got a letter from the IRS confirming either your first or second payment, but never actually got the money, you can try filing a Payment Trace through the IRS to track it down. 

If you owe child support, all or part of your stimulus check could be used to cover the expense.

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Incarcerated people are still able to claim their stimulus check 

Though there was a lot of confusion at first, people who are in prison and jail are eligible to qualify for the first stimulus check of up to $1,200 per adult. A ruling this fall from a federal judge in California required the IRS to contact those incarcerated who can file a claim for a stimulus check. As with others who are missing a payment, you'll need to fill out 2020 Form 1040 or 1040-SR to claim either the first or second check.

Could the IRS make you return your stimulus payment?

The IRS said a payment you get this year won't reduce your tax refund in 2021 or increase the amount you owe when you file your 2020 tax return. You also won't have to repay a stimulus payment if you qualify for a lower amount in 2021. (Here's how your income taxes influence your payment.)

However, if the IRS thinks it mistakenly sent you more stimulus check money than you qualify for, or if you receive money in your check for someone who's died, the agency expects you to return the payment.

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