Taxes and stimulus checks: What you need to know
- October 8, 2020
- Posted by: admin
- Category: Insurance, Tax & Accounting
If you got the first stimulus check of up to $1,200, does that count as income when you file your taxes next year? Based on current negotiations, could that change with a second check? And what happens if your income is different between your first check and a second one?
Your 2018 and 2019 taxes play an important role with the amount of your stimulus checks from the IRS. They help determine how much money you’re entitled to and who even qualifies for a direct payment in the first place, from dependents to adults and senior citizens and retirees.
We can help answer your questions about how tax returns and stimulus checks go together. And here are the most important things to know about stimulus checks overall.
Can I be taxed on my stimulus payment?
No, a stimulus payment does not count as income and you won’t owe tax on it, the IRS has said.
How do taxes determine the size of the stimulus check?
The IRS uses the adjusted gross income, or AGI, from your 2019 federal tax return (or your 2018 return if didn’t file one in 2019) to calculate your payment scale. Your AGI may be a different figure from your annual salary or take-home pay based on a variety of factors.
The income limits that decide exactly how much of the $1,200 per adult your household gets — and if you’re qualified to receive a check in the first place — stem directly from the AGI on your last batch of taxes, not necessarily what your income is at the time the checks go out.
What if my AGI changed from my 2018 taxes to my 2019 taxes?
If you filed your 2019 federal tax return before April 15, 2020, the IRS used your reported AGI to set the amount of your first payment. If you didn’t file in 2019 but did in 2018, that’s the year the IRS used. It’s likely a second check would follow the same protocol, if and when it happens.
What if I lost my job or got a new one since I filed taxes — could I still get a stimulus check?
If your financial situation changed after you filed your 2018 or 2019 tax return — for example, you received less income — you can claim that additional amount on your 2020 tax return when you file in 2021. You’ll likely need to take an extra step to claim your credit — the IRS will post more details closer to tax season 2020.
Can my 2019 taxes help me get a second check faster?
If you filed taxes in 2018 or 2019 and included direct deposit information, the IRS will attempt to deposit your check in the bank account you provided on your tax return. If you normally receive your refund by check in the mail, the IRS provided a tool to let you use your banking info to get an electronic deposit.
The deadline to use that tool expired mid-May, but the IRS would likely open it up again in the event a second stimulus check goes through.
Does this year’s stimulus payment affect how much I owe on next year’s taxes?
If you get a payment this year it won’t reduce your future tax refund or increase what you owe when you file your 2020 tax return next year. The payment also does not count as income to determine if you’re eligible for federal government assistance or benefit programs.
Will I have to pay back the money if I qualify for less with next year’s taxes?
You will not be required to pay back a stimulus payment if, based on your 2020 tax returns, you no longer qualify for the amount you received.
Will the IRS redirect my stimulus payment to cover taxes I owe?
If you owe federal taxes or have other federal debts, the IRS will not reduce your stimulus payment to cover those, with one exception we know of. If you owe past-due child support, the IRS will offset your payment to cover that expense.
With my 2020 tax return, can I claim stimulus money the IRS owes me?
The IRS uses your 2019 tax return if you filed it (or your 2018 return if you didn’t file one in 2019) to set the amount of your payment.
If a change to your financial situation was not reflected on your 2018 or 2019 tax return — the birth or adoption of a child, for example– you can claim that additional amount on your 2020 tax return when you file in 2021. This can include an additional $500 for a qualifying dependent that was owed, but not delivered, with the first check. The deadline to receive a missing payment this year for eligible dependents was Sept. 30.
If I didn’t pay taxes, could I still qualify for a payment?
If you were not required to file a 2018 or 2019 tax return because you were below income limits or you receive federal benefits such as Social Security, you could still qualify for a payment. The IRS recently reported that up to 9 million who fall into this nonfilers category may be owed a payment. You can use the IRS’ Non-filers tool to see if you are due a payment and have till Oct. 15 to receive a payment this year. After Oct. 15, you can claim it next year on your 2020 tax returns.
For more, here’s what you need to know about stimulus checks if you receive SSDI benefits, who else might be eligible for a second stimulus payment and what other benefits could be part of another relief package.
T&H Financial Services provides tax consultancy and tax filing service for businesses and individuals. We help you to approach the best financial option during this crisis. Contact us now for detailed consultancy and A-Z service.
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