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| Special in USA TODAY
COVID relief: Biden presents plan that includes $ 1,400 stimulus checks
Joe Biden has laid out a $ 1.9 trillion spending program that aims to speed up the distribution of coronavirus vaccines and provide economic relief.
Associated Press, USA TODAY
Americans have now received two rounds of stimulus checks, and questions abound as to how those payments relate to your 2020 tax returns as the production season approaches.
There is a connection between your tax returns and stimulus checks: the two payments – the first providing $ 1,200 per eligible adult and $ 500 per eligible child and the second giving out $ 600 for each eligible adult and child – were based on the adjusted gross income reported on your most recent tax return.
But the process of distributing stimulus payments has not always gone smoothly. In some cases, people have not received their checks at all – or may have received the wrong amount, given life changes like losing a job or having a child.
The good news is that the 2020 tax filing season will allow people who missed a check or received too little to claim their full stimulus payments, which the IRS will send out later this year via their tax refunds.
“If you haven’t received the full payment you were entitled to, it’s possible that when you file your 2020 tax return, you end up receiving more money,” says Eric Bronnenkant, Tax Manager at Betterment.
But, if you received more than what you were entitled to, the IRS cannot claim the refund, he notes. Some people whose income jumped in 2019 or 2020 from their previous tax returns – which the IRS relied on to determine if they were eligible for payments – may find themselves in this situation.
“If your economic situation changes – let’s say you’re qualified based on income for 2018 or 2019 because it was lower, but your economic situation has improved for 2020 – the IRS actually can’t ask. repayment of that money, ”adds Bronnenkant. “Your situation cannot get worse in this scenario.”
Here are the basics of what to know about your taxes and stimulus checks:
Will I owe Tax on Stimulus Checks?
No, because stimulus checks are not considered income by the IRS, notes Kathy Pickering, tax director at H&R Block. Instead, it’s prepaid tax credits for your 2020 tax return, authorized by two relief bills passed last year that aimed to stabilize the U.S. economy amid the pandemic of coronavirus.
“If you received the full amount of the first and second payment, you don’t have to do anything,” notes Pickering.
I am not sure I received the correct amount. What should I do?
First, compare your two stimulus payments to your adjusted gross income for 2020 as well as your family situation. That’s because the IRS based your two stimulus checks on your 2019 or 2018 tax returns – but your income or family size might have changed in 2020.
For example, stimulus checks directed a total of $ 1,100 for each dependent child 16 and under – but if you had a baby in 2020, the IRS wouldn’t have known that, since the agency tax will not start accepting 2020 tax returns until February. 12. In other words, you would not have received stimulus money for your child, even if your family qualifies for the additional $ 1,100.
In some cases, people haven’t received checks because of issues or incorrect bank account information with the IRS. In these situations, people can reconcile their default when they file their 2020 tax return.
To find out if you owe the money, see the IRS recovery refund worksheet, available in its 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 recovery refund credit on line 30 of your tax returns, the IRS says.
My income has changed since my last tax return. What should I do?
Taxpayers might not qualify for full stimulus checks if their income was above the income threshold based on their 2018 or 2019 tax returns. Single people earning less than $ 75,000 or married couples with combined income is less than $ 150,000 were eligible for checks, with amounts declining until payments were entirely cut for high-income families.
But 2020 has been a difficult year, with millions of people losing their jobs or suffering income losses due to reductions in their working hours. This means that some people who weren’t eligible for full payments based on their 2018 or 2019 tax returns might be eligible in 2020 if their income was lower last year.
In this case, they should use the recovery refund worksheet to calculate the amount owed to them and claim that amount on line 30 of their 2020 tax return. They will receive the stimulus payments in their refund check.
But as Betterment’s Bronnenkant noted above, if you’ve received stimulus payments based on older tax returns but don’t actually qualify based on your 2020 returns, you don’t. will not have to reimburse the IRS.
How will the stimulus checks impact my tax refund – and when will I get it?
How tax brackets affect what you pay in income taxes
Why being taxed, say 22% of your income, is much more complicated than you might think. Here’s a breakdown of what you actually pay in income taxes.
Just the FAQ, USA TODAY
If you owe more money from the two rounds of stimulus payments, the IRS will provide the additional payments with your refund check. Since the stimulus payments are not considered income by the tax agency, it will not impact your refund by increasing your adjusted gross income or putting you in a higher tax bracket, for example .
As previously noted, taxpayers will have to wait longer to get their tax refunds this year because the IRS won’t even begin accepting returns until February 12, about two weeks later than usual. The IRS is urging taxpayers to file electronically to receive their refunds as soon as possible, with the agency predicting that 9 of 10 taxpayers who file online will receive their refunds within 21 days.
Aimee Picchi is a business reporter whose work appears in publications such as USA TODAY, CBS News and Consumer Reports. She has spent nearly a decade covering tech and media for Bloomberg News. You can find her on Twitter at @aimeepicchi.
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