COVID-19 epidemic Most states pushed for businesses to close for at least part of last year, resulting in the lay-off of millions of workers. To keep the economy humming, the government issued two sets of economic impact payments. A check of $ 1,200 was sent to about 160 million people in the first spring and early summer, and then a second $ 600 payment in late 2020. In both cases, additional funds were allocated for families with minor children.
As we do in the tax filing season, now you are wondering what and how the payment will be Influence your tax bill. Keep reading for answers to common questions.
Do I need to pay tax on the Stimulus payment?
The good news is Excitement check The tax bill will not increase this spring received last year.
“Any stimulant payments are not taxable,” says Jerry Ziegler, a nominated agent who is a financial coach with SaverLife, a nonprofit organization that helps people save money and improve their financial condition. Serves to encourage.
However, you do not need to take the term tax professional for this. The IRS gives instructions for this year’s 1040 Form State, in part: “Any economic impact payments you receive are not taxable for federal income purposes.”
What is Recovery Waiver Credit?
Taxpayers will see a new line 1040 form this year. Line 30 provides a place to claim a rebate credit. However, if you received an incentive payment last year, you probably won’t qualify for the rebate.
“The checks you have received are advances on that credit,” says Raymond Edwards, national technical tax director at wealth management firm Aspiriant.
Those who did not receive payment last year or who had a change in their status, such as adding a child, can complete a worksheet to determine if they are eligible. Claim credit on their 2020 tax return.
Do I have to refund the Stimulus payment if I earn more in 2020?
For last year’s payments, only single taxpayers with adjusted gross income of less than $ 75,000 or married couples, filing jointly, were eligible for the full amount of adjusted gross income at or below $ 150,000. To determine eligibility, the government used the 2018 and 2019 tax return data.
Since the incentive payment was actually an advance on the recovery rebate credit, some people may be concerned that they will need to refund the money if their 2020 income exceeds the eligibility threshold. Fortunately, this should not be a concern.
“Our understanding is that they are going to pardon it,” says Grighe Hammer, president of Hammer Financial Group in Shimmerville, Indiana. In other words, the IRS has no plans for those who try to recover money from those who earned more in the past year.
What if my dependents change in 2020?
If you have added a new child to your family in 2020, you may be eligible for a rebate rebate credit for that child. On the other hand, if you have an adult child who will no longer Claim as a dependent This year, that child may be eligible for their own credit when filing the 2020 tax forms.
According to Ziegler, divorced parents who claim children in alternate years can benefit from a recovery rebate credit. For example, if one parent claimed a child in 2019 and received an incentive payment last year, the other parent was able to claim the child on their 2020 return and receive credit this year It is possible.
Can a third Stimulus check affect my 2020 tax?
There has been talk of a third stimulus payment issuing this Spring, but it should not affect the 2020 tax return. “I think it’s too late to call this new payment a 2020 payment,” says Edwards.
Although the details of a new incentive package are still unclear, some observers believe that eligibility will be tightened for future investigations. “The eligibility for payment is more than likely to be different this time,” says Mike Schenk, chief economist at the Credit Union National Association.
This means those who think their 2020 income will be too high to qualify for a new incentive payment want to wait until the April 15 deadline to file their tax returns. Meanwhile, those who were not eligible for a check last year, but have seen their incomes fall. File as soon as possible To avoid any delay in receiving new incentive payments, if any approved.