Taxpayers with a lower 2020 AGI will receive a credit
The payment is actually an advance on a tax credit claimed on the 2020 tax return. If a taxpayer’s income is lower in 2020 than in 2019, any additional credit for which they are eligible will be refunded or will reduce the tax liability when the 2020 tax return is filed. As it stands, if your 2020 income is higher than the thresholds and you received the payment, you will not need to pay back any part of the payment.
Taxpayers who owe back taxes will still receive the payment
While the IRS has not officially provided guidance on this, the Senate Finance Committee stated that the bill turns off nearly all administrative offsets that ordinarily may reduce tax refunds for individuals who have past tax debts, or who are behind on other payments to federal or state governments, including student loan payments. The only administrative offset that will be enforced applies to those who have past due child support obligations that the states have reported to the Treasury Department.
The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act provides relief to U.S. citizens amidst the COVID-19 pandemic, including an economic impact payment. While there is no qualifying income requirement for these checks, there is a phase-out in place that may affect you. Because of this unprecedented situation, scammers are taking advantage of the confusion and uncertainty these checks are presenting and it’s important to be diligent and informed.
Is there a qualifying income requirement?
There is no qualifying income requirement. If you filed a tax return for either 2019 or 2018, you will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples who file a joint return, plus $500 for each qualifying child. If your adjusted gross income was less than $75,000 (individual) or $150,000 (married filing joint), you will receive the full payment. The payment amount is reduced by $5 for each $100 above the $75,000/$150,000 amount. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible. In addition, taxpayers who owe back taxes will also receive the payment.
When will the payments arrive?
The stimulus checks will be automatically deposited by the end of April into the same banking account reflected on the 2019 or 2018 return filed. To ease the worry, the Treasury plans to develop a web-based portal allowing individuals who have not recently submitted banking information to the IRS to do so, enabling them to receive payments immediately.
Be aware of potential scams
The IRS is warning people about possible scams tied to the economic impact payments that could lead to tax-related fraud and identity theft. Because these are unusual times, scammers and phishers may try to take advantage of people unaware of how these checks will be distributed. Scammers use a variety of means to extract personal and financial information via emails, phone calls, text messages, websites and social media accounts. The IRS will not contact you by any of these means to ask for personal information necessary to receive the stimulus payments.
Be mindful of these scamming tactics:
• The official term is “economic impact payment,” though scammers may use “stimulus check” or “stimulus payment.”
• Scammers may ask for personal and/or banking information noting this will speed up the stimulus payment process.
• Scammers may ask you to sign over the check to them, or they may mail you a bogus check and ask you to verify the information to cash it.
Please note: The IRS will deposit the check into the direct deposit account you previously provided on your tax returns. By mid-April, the IRS will have a newly designed secure portal for those who have not provided a direct deposit account. If the IRS does not have this information, the check will be mailed to the address on file. Do not provide banking information to anyone else.
If you have already filed your 2019 tax return, you do not need to contact me. If you have yet to file, you have an extension until July 15, 2020, to file and pay any tax due. As always, I’m here for you during these trying, and often confusing, times. COVID-19 is affecting each of us in a unique way, and I am proud to be a reliable, comforting resource for you as we continue to move forward. Please stay safe, stay home and stay healthy
Our government is working fast and furiously to get needed financial relief to you as soon as possible. The recently passed Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides that relief in a number of ways.
2020 Recovery Rebates
The most immediate assistance will come to you in the way of a rebate of your tax. The payment will equal $1,200 for single taxpayers and $2,400 for married taxpayers who file a joint return. If you have dependent children under the age of 17, you’ll receive an additional $500 per child. The payment will phase out once your income reaches $99,000 for single filers, $114,500 for head of household and $198,000 for joint filers. There is nothing you need to do to receive this payment. It is automatic and based on what you reported on your 2019 income tax return. If you have not filed your 2019 return yet, the IRS will base your payment on your 2018 return. If you have no income, or your income comes entirely from non-taxable, means-tested benefit programs such as SSI, you also qualify for the advance payment. If no returns were filed in 2018 or 2019, information from your 2019 Form 1099-SSA and Form 1099-RRB will be used. The IRS intends to provide this advance payment through direct deposit using the bank account information you reported on your last filed return. If you did not include any bank account information on your tax return, you’ll receive a check by mail.
If you are affected by the coronavirus and are under 59½, you may withdraw up to $100,000 from your retirement plan or IRA without incurring the 10% premature distribution penalty. Penalty-free distributions are those made after Jan. 1, 2020, and before Dec. 31, 2020. You qualify for this distribution if you, your spouse or a dependent have been diagnosed with COVID-19 or are experiencing adverse financial consequences as a result of being quarantined, furloughed or laid off, working reduced hours due to the virus, being unable to work due to lack of child care because of the virus, or had to close your business or reduce the amount of hours your business is open.
Retirement Plan Loans
Under the current rules, you can generally borrow up to $50,000 from your retirement plan tax-free if you agree to repay it within five years. This relief increases that amount to $100,000. If you have a current plan loan you’re repaying in 2020, you’ll be granted a one-year delay for making that repayment.
Required Minimum Distributions
When you reach a certain age, generally 70½, you are required to take a minimum distribution from your IRA or retirement plan. If you are required to take a minimum distribution in 2020, you can choose not to without incurring a penalty
This relief allows you a deduction for being charitable. Generally, you must itemize your deductions to receive a tax benefit for charitable contributions. Beginning in 2020, you can make charitable contributions in cash of up to $300 without itemizing your deductions. This is a massive relief bill affecting millions of taxpayers. I only covered the portions I believe affect you directly. As always, please reach out to me with any questions you may have. Stay well!