Dear Quentin,
Our dependent son — a college student — has received three stimulus payments to date, which we believe he may not be entitled to. He has deposited them, but has not spent the money. Does he need to return them?
He filed taxes because we have a 529 college savings plan in his name. Other than that, he has no reportable income. We checked, and his tax returns clearly state that a third party, his parents, claim him as a dependent.
If he is not supposed to have received the money, how can he go about returning it?
Thank you.
Dad Trying to Teach Ethical Behavior
Dear Dad,
Make sure this is not COVID-related financial aid sent directly to your son by his college. Otherwise, you are correct: If your son was an adult dependent over the age of 16, he did not qualify for the first two stimulus checks. Under President Biden’s $1.9 trillion American Rescue Plan, however, dependent students may receive the full stimulus.
This time around, dependent students like your son and independent students — including college graduates and undergraduates older than 24 — will receive the full $1,400 payment if they have an income of $75,000 a year or less.
“ If your son is claimed as an adult dependent on your taxes, you should receive the payment on his behalf. ”
In the first round of stimulus checks last year, the parents of dependents aged 16 or younger were entitled to $500 payments; that figure rose to $600 with the second round of economic stimulus payments; under the third batch, adult dependents can qualify for the entire amount ($1,400).
The latest economic stimulus payments decrease for individuals earning $75,000 and up — and they phase out completely for individuals making $80,000 or more and couples making $160,000 or more in adjusted gross income.
This third stimulus check is an advance tax credit on your 2021 taxes, and calculated based on your 2020 taxes OR your 2019 taxes if your 2020 are unavailable. On that basis, there is no claw-back provision for the third stimulus payment if the 2019 filing was made in good faith.
“Essentially, as long as the tax-return used to determine eligibility was filed in good faith, once the stimulus check is paid the case is closed,” says Chad Lange, CFP, relationship manager and financial planning coordinator at Merit Financial in Alpharetta, Ga.
“ If both of you have received a stimulus check for your son, you’re right, that’s one check too many. ”
“If a tax-filer received stimulus funds based on their 2019 tax return, the IRS cannot take that dollar amount back or reduce any tax refund if the tax-filer later files a 2020 tax return that would have resulted in a reduced stimulus check,” he says.
However, if your son is claimed as an adult dependent on your taxes, as you say, you should receive the payment on his behalf. If both of you have received a check for your son, you’re right, that’s one check too many. The IRS gives some guidelines here on how to return an erroneous refund.
I have received hundreds of letters from people who have not received their stimulus, and many in situations like yours. People have also said their checks were garnished for unpaid child support; other taxpayers say they’ve received stimulus checks for dead relatives. It’s been quite a year.
As for being a dad teaching ethical behavior, my suggestion is to explain who does and does not qualify for stimulus payments, point out that they were sent to help families who were struggling to put food on the table and pay the rent, and ask your son what he thinks he should do.
After he gives it some thought, his answer may surprise you.
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