As the coronavirus (COVID-19) continues to affect our country and local communities, we want to provide some clarity to the tax-related provisions of the CARES Act. The “economic impact payments” for individuals have garnered the most interest and have received a great deal of media attention over the past six months. However, there is still some general confusion around the specifics of these payments and how they will affect your tax situation in 2020. The payments were structured as income tax credits for 2020 that were paid in advance, which is slightly different than a straightforward “stimulus check”. The payments were calculated using the following criteria:
- Eligible individuals received an economic impact payment of up to $1,200 ($2,400 for married couples), with parents receiving an additional $500 for each child under the age of 17.
- Payments begin to phase-out for those with income exceeding the following amounts:
- $75,000 for single filers
- $150,000 for married couples filing jointly
- The payments are completely phased-out for single filers with income exceeding $99,000,and for joint filers with no qualifying children and income exceeding $198,000
- The IRS calculated the amount of each person’s rebate payment based on either their 2019 tax return or their 2018 tax return if they had yet to file their 2019 return.
Although the initial advanced payments were made based on 2018/2019 income, the final amount of the rebate will ultimately be based on 2020 income and calculated on your 2020 income tax return. This means that if you had too much income in 2018/2019 to receive a rebate payment in advance, or the advanced payment you received was partially phased-out, you may still qualify for a full or partial credit on your 2020 tax return if your 2020 income falls below the above threshold.
However, if you received a rebate payment in advance that you will ultimately not qualify for, you will not be required to pay back any amount received when you file your 2020 tax return.
Please call us at 913-381-7411 or email email@example.com with any questions you may have.