The common info on the web is that you typically don't have to repay stimulus checks, if it turns out that you shouldn't have gotten them, or only partially gotten them.

What if someone files a 2020 return now (Mid of February 2020), with a reported income below the cutoff, the filing gets accepted and he gets both 2020 stimulus payments.

After that, he 'realizes' that he 'forgot' a chunk of income, and files a correction (1040-X), let's say in early April. If the correction pushes him over the stimulus check cutoff point, would the IRS request the stimulus payments back too? (of course there is more tax to pay for the higher income, ignore that)

Would even trying it be tax fraud? After all, who could prove if he really forgot it in the first filing or just pretended to?

Update / Background: what happened is that in Mar 2020, when stocks were 40% down, they did a huge IRA to Roth IRA conversion. Seemed to be a great idea at that time - nobody knew stimulus would come. Now they cheated themselves out of both stimulus checks; unemployed and out of cash, and no way to undo the conversion...
Life's a bitch.

[this is posted from a single-use secondary ID, for anonymity]

  • 3
    Look on the bright side -- given how much stocks have gone up since then, the conversion was still probably the right decision even considering the stimulus. Worst case, if out of cash, they could take a modest early withdrawal from the Roth IRA now (and pay tax/penalty, if there are no Roth contributions available), and perhaps still come out ahead.
    – nanoman
    Feb 12 at 3:49
  • "Would even trying it be tax fraud? After all, who could prove if he really forgot it in the first filing or just pretended to?" The question of what is tax fraud and the question of when you can prove tax fraud are two different questions. There's no question that filing a knowingly incorrect tax form to obtain a payment you are not entitled to is tax fraud, even if you did have to pay it back. Feb 12 at 23:27

It is already too late to do anything to receive either of the two 2020 stimulus payments.

If you are eligible for the stimulus payments based on your 2020 status, and did not receive the payments in 2020 (or did not receive everything that your 2020 status makes you eligible for), then you will get the appropriate amount as a tax credit on your 2020 tax return via the Recovery Rebate Credit, which will either increase your refund or decrease the amount you owe.

Besides the fact that it is illegal, filing a return with incorrect information now will do you no good. If you fudge things so that you are eligible for the credit, when you fix it later you will indeed be required to send back the money you received for the credit. This is a difference between the stimulus checks that were handed out last year and the tax credit on the return.

I'm confused about the background story that you have added to the question. The two stimulus checks that were sent out in 2020 were based on your 2018 or 2019 situation, as the 2020 tax return had not yet been filed. If you did not receive stimulus checks in 2020, it was because you had too much income in 2018 or 2019, and the Roth conversion in March 2020 would not have affected it in any way. Of course, the Roth conversion could indeed increase your taxable income to make you ineligible to receive the 2020 Recovery Rebate Credit.

  • The income in 2019 was indeed much too high to get a stimulus check. Income in 2020 (without the Roth conversion) went significantly down, to a level where the full stimulus would have been paid (but it wasn't because of the higher 2019 income).
    – MoneyMan
    Feb 12 at 19:08
  • 1
    @MoneyMan - I hope the conversion at the bottom was high enough, that in hindsight, it was the right choice. I'd trade my (2020 reconciliation total, looking like $4000?) for the chance to convert a huge sum at the market bottom. Even $50K, for you, is now $20K higher, tax free. I hope that in the end, that was the case for you, that the big picture, your total wealth, was improved by the move. Feb 18 at 14:51

If done intentionally, it would be fraudulent (regardless of how readily intent could be proved).

Moreover, the amended 2020 return with increased income would involve recalculating the Recovery Rebate Credit -- line 30 of the 2020 Form 1040. So the excess stimulus would become additional tax due.

The stimulus had a phase-out at a 5% rate rather than a sudden cutoff, so gaining a substantial undeserved payment, even temporarily, would involve substantial understatement of income (by 20x the amount). The larger the understatement, the less plausible it is accidental.

The policy of not clawing back the stimulus is intended for payments that were made automatically based on 2019 or 2018 returns before 2020 returns were filed. These were special payments and are not considered part of one's tax balance unless one is claiming an additional payment via the 2020 Recovery Rebate Credit.

  • Amending their 2020 return could decrease their Recovery Rebate Credit, but it wouldn't affect a third stimulus payment if it had already been paid, and it presumably wouldn't be clawed back on their 2021 return.
    – Craig W
    Feb 12 at 0:56
  • Doesn’t that depend on what the third check is based on? The second check, I didn’t get, but my 2020 return shows it built in, so based on this return, I’ll get it. If the third check is also 2020 income based, it will reconcile on this return. Feb 12 at 1:32
  • @JTP-ApologisetoMonica It seems likely the third stimulus will be based on your 2020 return, if available. But it's almost certainly too late for the third stimulus to be included as part of the 2020 Recovery Rebate Credit.
    – Craig W
    Feb 12 at 1:39
  • Perfect. I have an odd every-other-year cycle going on. 2019,2021 high income. 2020 kept low. Feb 12 at 1:42
  • @JTP-ApologisetoMonica I used to do that, but the SALT cap rendered that strategy pointless.
    – shoover
    Feb 12 at 3:25

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