Workers’ Compensation Benefits and My Economic Impact (Stimulus) Payments

On March 11, 2021, Congress passed and signed into law the American Rescue Plan Act of 2021, which includes another economic stimulus payment. This document is intended to provide you with information and resources regarding the upcoming Economic Impact Payment (Stimulus) and provide information regarding the role your workers’ compensation benefits may or may not have on your eligibility to receive the most recent round of payments.

This resource is for informational purposes only and is not intended to be legal or tax advice. We strongly recommend you contact a tax professional for any questions regarding your personal financial and tax situation.

Q: Am I eligible for a Stimulus payment if I receive a pension or time-loss benefits because of my Washington State Workers’
Compensation claim?

A: Yes, you are eligible to receive a Stimulus payment even if you receive workers’ compensation benefits.

Q: What are the income thresholds for this round of Stimulus payments?

A: Individuals making less than $75,000 a year, married couples making less than $150,000, and heads of household making less than $112,500 a year in adjusted gross income and their dependents each receive the full amount of $1,400, per person. The 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.[1]

Q: What is my income threshold based on?

A: Your income threshold is based on either your 2019 tax filing if you have not filed taxes for 2020 or your 2020 tax filing if have already filed taxes.[2]

Q: Does my Washington state workers compensation pension/time-loss count towards the income threshold?

A: No. Your Washington State Workers’ compensation pension/time-loss benefits are not considered taxable income; therefore, these benefits do not count towards the income threshold.

Q: I have been told by a tax professional or even the IRS that pensions are taxable income? What do I do?

A: A traditional pension given by an employer, union or other government agency is different from a Washington State Workers’ compensation “pension.” It is very important that you do not report your Washington state workers’ compensation pension/time-loss benefits to the IRS as income, as that could incorrectly impact the amount of taxes you owe.

A Washington state workers’ compensation “pension” is not the same as a traditional pension offered through an employer, union, or
government agency. If you are discussing your “pension” with a tax professional, accountant, or government agency, you will need to clarify that your “pension” is a workers’ compensation benefit earned for life and is non-taxable.

Q: If I qualify, how will I get my Stimulus payment?

A: If you qualify and file your taxes using direct deposit, your economic stimulus payment will be directed deposited into the same account used for your tax filing. If you do not file your taxes using direct deposits, a paper check or debit card will be mailed to your address on file with the IRS.  [3]

Q: Can I check the status of my economic stimulus payment?

A: Yes. You can check the status of your 2021 economic stimulus payment through the IRS’ “Get My Payment” tool. This tool does not show you the status of the previous two economic stimulus payments given in 2020.

Q: What if I do not file taxes?

A: If you do not file taxes but you have already received the first and second economic stimulus payments, then you should receive this 2021 payment in the form of a check or debit card mailed to the address the IRS has on file. If you did not receive the first economic stimulus payment, or you did not receive the full amount of the last two stimulus payments, even though you qualified, you may be eligible to claim the 2020 Recovery Rebate Credit by filing a 2020 tax return, even if you normally do not file a tax return. [4]

Q: What is the 2020 Recovery Rebate Credit?

A: The 2020 Recovery Rebate Credit is a tax credit designed to help eligible people who did not get the first stimulus check or did not get the full amount of the last two rounds of economic stimulus payments. You may be eligible to claim the recovery rebate credit on your 2020 tax return to make up the difference. If you are eligible for the credit, you must file a 2020 tax return to claim the Recovery Rebate Credit even if you are not required to file a tax return for 2020.

Put simply, in order to get the first two stimulus payments if you have not already received them, as well as the third stimulus payment, you must file a 2020 tax return, even if you don’t have taxable income.

Economic Impact Payments were based on your 2018 or 2019 tax year information. The Recovery Rebate Credit is similar except that the eligibility and the amount are based on 2020 information you include on your 2020 tax return. The IRS offers free tax filing software if you make less than $72,000 in gross adjusted income. [5]

Resources:

General Information regarding Coronavirus relief and
economic stimulus payments: https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments

IRS “Get My Payment” Tool: https://www.irs.gov/coronavirus/get-my-payment

IRS 2020 Recovery Rebate Credit Information: https://www.irs.gov/newsroom/recovery-rebate-credit

IRS Tax Filing “Free File”: https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

[1] https://www.irs.gov/newsroom/more-details-about-the-third-round-of-economic-impact-payments

[2] https://www.irs.gov/newsroom/more-details-about-the-third-round-of-economic-impact-payments

[3] https://www.irs.gov/coronavirus/get-my-payment-frequently-asked-questions

[4] https://www.irs.gov/newsroom/economic-impact-payment-information-center-topic-g-non-filers-tool

[5] https://www.irs.gov/newsroom/recovery-rebate-credit