COVID 19 Stimulus Payments
Sep 8, 2020
COVID 19 Stimulus Payments
Simple Tax Advice, Volume 4
Many of us received payments of $1200 or more to help stimulate the economy during the 2020 pandemic. Being on the front lines in a tax office, I heard a lot of questions from clients as to what happens next. Most feared that they would have to pay tax on the payments when they filed their 2020 returns:
This is not the case. The payment amount received for the economic stimulus is not added to taxable income. However, you will need to know what you received in order to reconcile your 2020 return when you file in 2021.
The other question I heard over and over is: What happens if I was qualified to receive a payment but didn’t?
Most taxpayers are qualified to receive all or part of the stimulus payment. The Income limit is $75,000 for a single individual, $112,500 for someone who files head of household, and $150,000 if married filing joint. The payment doesn’t go away at the limit, but it is reduced by $50 for each $1000 over. This is actually stated as a 5% reduction of the amount of your AGI which exceeds the limit.
As an example, if you are a married couple, filing joint and your adjusted gross income is $154,000 you will receive $2,400 less ($4,000 x 5%) $200. Your payment will be $2,200. If you are a married couple filing joint and your AGI is $198,000, you will receive $2,400 less ($48,000 x 5%) $2,400. Your payment will be $0. As you can see, in the case of a married couple filing joint, it is at $198,000 that the payment phases out completely
If you were qualified to receive a payment but did not for any reason other than unpaid child support, you will receive your payment as a credit on your 2020 tax return. This ensures that all persons who are qualified to receive a payment do so. For those of you that do not file income tax returns because you have no taxable income or some other non-filer requirement, the IRS has tools on the website IRS.gov to help you get the information submitted to receive your stimulus payment.
The next question is this: What if I received more money in my stimulus payment than I was entitled to based on my AGI for 2020. Will I need to pay it back?
The answer here is again, no. Taxpayers received stimulus payments based on their 2018 or 2019 returns. My understanding from the IRS website and my company’s training is this; If the taxpayer received too much money, they would not have to pay it back. In order for the IRS to require the taxpayer to return an overpayment, it would have been written into the law that authorized the payments in the first place. It is not in the law; therefore, recipients will not have to return any overpayment.
The answer to the final question is more good news. The question being asked is what if I was not paid enough money based on my 2018 or 2019 return?
Once again, if the taxpayer did not receive enough money, and it was not reduced or held because of unpaid child support, they will receive the difference as a credit on their 2020 rturn.
- (no comments)