Stimulus Payments: What You Need To Know

 

1. Great news for individuals regarding the Stimulus payments is that they will not need to be paid back, and are tax free. Stimulus payments are an advance tax credit on your 2020 1040 tax return, with a twist. After the tax credit is calculated on your 2020 tax return, it will be offset by any advanced payments
you have received during the year. If you have not received any advanced payments, or if your Stimulus payment was less that the credit on your tax return, your tax refund, if any, will be increased by that amount. On the other hand, if your Stimulus payment exceeded the tax credit calculation, you will not have to repay the IRS for the excess.

2. When your 2020 tax return is filed, joint taxpayers will receive a tax credit up to $2,400, plus $500 for each "qualifying" dependent. Single, or Head of Household filers, will receive a tax credit of up to $1,200 plus an additional $500 for each "qualifying" dependent. The tax credit will start phasing out with
Adjusted Gross Income (AGI) of $75,000, and will completely phase out with AGI exceeding $99,000. The tax credit starts phasing out for joint filers with AGI of $150,000, and completely phases out at $198,000.

3. Parents who have children in school who are age 17 or older will not qualify for the additional $500. Along with other requirements of the CARES Act, a qualifying child must be under the age of 17 in 2020. Note, that this is a different requirement than to be claimed as a dependent on parents' 1040 tax
return, under the U.S. Tax Code.

4. Under the CARES Act, even if a dependent is not claimed by someone on their tax return, they still cannot receive the Stimulus payment.

5. A child that is independent of the parents and files a 1040 tax return, may receive up to the $1200 Stimulus payment. Among other requirements, the child must provide more than one half of their own support.

6. Stimulus payments to individuals have started to appear in bank accounts where IRS has direct deposit information. If you have direct deposit, money should be in your bank account within the next two weeks, but do not be surprised by delays.

7. A tax credit is a dollar for dollar reduction of your taxes and is TAX FREE. You do not have to itemize your tax deductions on your 2020 tax return to benefit.

8. For people who normally do not file a tax return, or who want to check on the status of their Stimulus payment, or enter direct deposit information, can click on this link, however expect long delays and frustration. Information that you will need to enter to arrange for direct deposit:

a. Drivers License or state ID
b. Social Security number
c. Date of Birth
d. Mailing Address used on your latest tax return
e. Adjusted Gross Income from your most recent tax return submitted, either 2018 or 2019.
f. Refund or Amount Owed on latest tax return submitted
g. Name of Bank
h. Bank Account Number
i. Bank Routing Number-make sure banking information is absolutely correct, or it will take months for IRS to get it straightened out.

9. For individuals receiving Social Security, the Stimulus payments should be directly deposited into their bank accounts later this month. (Note, IRS changed their procedure on Social Security recipients three times including at one time insisting a 1040 be filed which, in my view, was absurd.)

10. People who receive a check in lieu of a direct deposit should start receiving a check sometime in May. The first checks will be issued to lower income taxpayers, below $10,000 AGI. However, for taxpayers receiving paper checks, it may be September or much later before checks are issued.

11. IRS is planning to mail a letter to the taxpayer's last known address and provide information on how Stimulus payments were/will be made and how to report any failure to receive.

12. You and your loved ones, especially the elderly, should be aware of scams that will blanket the country. IRS will never call and ask for ANY information by telephone or email. Also, be aware that letters you receive may appear to be from IRS, but are not. NEVER respond to these letters before calling IRS.

Please contact us if you have any questions or need information we can provide. Also, please share this post with family and friends.

Contact

  • Address:DJL Accounting & Consulting Group, Inc.
    Cider Mill Professional Center, Building C-102
    1570 S Canfield Niles Road
    Youngstown, Ohio 44515 
  • Phone:330 779 0781