09 Apr Understanding the Economic Impact Payment
Things are changing by the minute regarding taxes, the IRS, and the Economic Impact Payment. After the CARES Act was passed at the end of March, the government agreed to send stimulus checks to qualifying taxpayers. For those who have direct deposit information with the IRS, those checks could be coming as soon as next week. This is different from the SBA Loans, which are available to small business owners. Click this link if you want to know about those.
Economic Impact Payment Refresh: Who Qualifies?
Stimulus checks of $1200 and $2400 will go out to individuals and married couples respectively. The only caveat is that if you make $99,000 or more as an individual or $198,000 or more as a married couple, you won’t receive any money. Additionally, a phaseout begins if your individual income is $75,000 or above or if your married income is $150,000 or above. You’ll still get money, but it won’t be the full $1200. Taxpayers will also receive an additional $500 for every dependent under the age of 17.
The IRS will determine how much you get from your 2019 tax return. If you haven’t filed it yet, your 2018 return will be used instead. If you experienced a significant change last year (had a child, loss of income, etc), then be sure to file your 2019 return ASAP.
Learn more about qualifications for the stimulus check at the IRS website. A transcript from the IRS about the check is also available at the bottom of this post.
The Economic Impact Payment is Not Taxable
There’s been some confusing information going around about the stimulus checks. They’ve been labeled as a tax credit advance, leaving many worried that they’ll have to pay that money back. This is not the case. The money will be reported on your 2020 return as a tax credit, but it essentially takes care of itself.
Furthermore, the stimulus check is not taxable income, so you won’t owe any additional money to the IRS next year.
What if Your Income Drops in 2020?
This is a big question people are asking. Some people may not be eligible for the stimulus check based on their 2019 return but will experience a drop in income this year (for obvious reasons). If that’s the case, they will receive whatever money they qualify for when they file their 2020 return. Those people will receive their stimulus checks in early 2021. Additionally, if you have a child in 2020, you’ll receive that extra $500 when you file your 2020 return as well.
If you have any questions about the stimulus check or need help getting your 2019 return filed, call us at 614-524-4888 or 614-310-0506!
Below is a transcript from the IRS about the payment:
“Here’s how much individuals will get from the Economic Impact Payments
Employed full or part-time? Unemployed? A temporary or gig worker? Retired or disabled? Receive public benefits? Have no income? Most U.S. residents – under certain income levels – will receive the Economic Impact Payment if they are not claimed as a dependent of another taxpayer and have a Social Security number.
Here’s how much the payments will be:
- Eligible individuals will receive up to $1,200.
- Eligible married couples will receive up to $2,400.
- Eligible individuals will receive up to $500 for each qualifying child.
Taxpayers will receive a reduced payment if their adjusted gross income is between:
- $75,000 and $99,000 if their filing status was single or married filing separately
- $112,500 and $136,500 for heads of household
- $150,000 and $198,000 if their filing status was married filing jointly
Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an Economic Impact Payment.
Payments will also be automatic for people who receive Social Security retirement, disability (SSDI), or survivor benefits or Railroad Retirement benefits who don’t normally file a tax return. Those receiving these benefits who aren’t claimed as a dependent on someone else’s return or required to file a tax return are eligible for a $1,200 payment. However, people in this group who have qualifying children under age 17 will need to provide information using the Non-Filers: Enter Payment Info tool to claim the $500 payment per child.
The IRS encourages people to share this information with family and friends. Some people who normally don’t file a tax return may not realize they’re eligible for an Economic Impact Payment.
For additional and updated information, visit the Coronavirus Tax Relief page on IRS.gov.”