Americans have now received two rounds of stimulus checks, and there are numerous questions about how those payments will flow into their 2020 tax returns as filing season approaches.
There is a connection between your tax returns and the stimulus checks: the two payments – the first provision $ 1,200 per Eligible Adult and $ 500 per Eligible Child and the second distribution $ 600 for each qualified adult and child – based on the adjusted gross income reported on your most recent tax return.
However, the process of distributing stimulus payments has not always gone smoothly. In some cases, People didn’t get their checks at all – or maybe have received the wrong amount, given the changes in life like a Job loss or the birth of a child.
The good news is that the 2020 tax filing season will allow people who missed a check or received little enough to claim their full stimulus payments, which the IRS will send about their tax refunds later this year.
“If you haven’t received the full payment you were entitled to, you may get more money when you file your 2020 tax return,” he says Eric Sources Page, Tax manager at financial services company improvement.
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However, if you’ve received more than you are due, the IRS cannot reclaim the money, it notes. Some individuals whose 2019 or 2020 income increased compared to their previous tax returns – which the IRS relied on to determine if they qualified for the payments – may find themselves in this situation.
“If your economic situation changes – let’s say you qualified based on 2018 or 2019 income because it was lower, but your economic situation improved for 2020 – the IRS cannot actually reclaim any of that money,” adds Bronnenkant. “Your situation cannot get worse in this scenario.”
Here are the basics of what you should know about your taxes and the stimulus checks:
Will I owe taxes on the stimulus checks?
No, because the stimulus checks are not considered income by the IRS, notes Kathy Pickering, chief tax officer at H&R Block. Instead, they’re pre-paid tax credits for your 2020 tax return, approved by two relief laws passed last year aimed at stabilizing the U.S. economy amid the coronavirus pandemic.
“Once you’ve received full first and second payments, you don’t have to do anything,” notes Pickering.
I am not sure I received the correct amount. What should I do?
First, check your two stimulus payments based on your adjusted gross income for 2020 and your family situation. That’s because the IRS based your two stimulus checks on either your 2019 or 2018 tax returns – but your income or family size may have changed in 2020.
For example, the stimulus checks totaled $ 1,100 to each dependent child under the age of 16 – but if you had a baby in 2020, given the tax authority, the IRS wouldn’t have known The tax return for 2020 will not be accepted until February 12th. In other words, you would not have received any incentive money for your child even though your family qualified for the additional $ 1,100.
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In some cases people didn’t get checks because of it Errors or incorrect bank account information with the IRS. In situations like this, people can reconcile their defaults when filing their 2020 tax returns.
To find out if you are owed money, refer to the IRS recovery discount worksheet available on their IRS 2020 instructions for filing your tax return (Form 1040.)
If the calculation on the worksheet is greater than zero, you can claim that amount as a refund credit on line 30 of your tax return, according to the IRS.
My income has changed since I last filed my taxes. What should I do?
Taxpayers may not have qualified for the full stimulus reviews if their income was above the income limit based on their 2018 or 2019 tax returns. Single persons earning less than $ 75,000 or married couples with combined incomes less than $ 150,000 qualified for the checks. The amounts decreased until payments for higher income families were completely cut.
But 2020 was a tough year, with millions losing their jobs or lost income due to reduced working hours. This means that some individuals who did not qualify for full payments based on their 2018 or 2019 tax returns may qualify for 2020 if their income was lower in the last year.
In this case you should use them Recovery discount Worksheet to calculate how much you owe and claim that amount on line 30 on your 2020 tax return. You will receive the stimulus payments in your refund check.
But like Betterment’s Bronnenkant mentioned above, if you’ve received business stimulus payments based on older tax returns but don’t really qualify based on your 2020 returns, You don’t have to repay the IRS.
How will the stimulus checks affect my tax refund – and when will I get them?
If you owe more money on the two rounds of stimulus payments, the IRS will put your refund check on the additional payments. Since the stimulus payments are not considered income by the tax authorities, this will not affect your refund, for example by increasing your adjusted gross income or placing you in a higher tax bracket.
As mentioned earlier, this year taxpayers will have to wait longer to receive their tax refunds as the IRS won’t start accepting tax returns until February 12, about two weeks later than usual. The IRS urges taxpayers to file electronically in order to get their refunds in the shortest possible time. The agency predicts that 9 out of 10 taxpayers will submit via email receive your refund within 21 days.
Aimee Picchi is a business journalist whose work appears in publications such as USA TODAY, CBS News and Consumer Reports. She spent nearly a decade covering technology and media for Bloomberg News. You can find her on Twitter at @aimeepicchi.