With tax season looming and stimulus check negotiations leading every headline, it’s important to get the facts straight. Your taxes may, indeed, be affected by 2020’s two stimulus programs, as well as any future ones. Here’s what residents near St. Charles, IL need to know.
No. Stimulus checks do not count as income, so they are not taxable. They are, in essence, advances on future tax credits. You received by check a tax credit in 2020 that normally would have had to wait until taxes were filed in 2021.
This also means that the amount of your stimulus check will not count towards your adjusted gross income and will not push you into a higher tax bracket.
While there are no situations in which your taxes will go up due to the stimulus, there are several situations in which you may qualify to receive even more stimulus money. In short, there are no downsides to this stimulus’s effect on 2020 tax filings.
Here are a few scenarios which may impact your tax refund for a net gain:
If your family size increased in 2020, either through the birth or adoption of a child or through taking on elderly dependents, this will increase your refund. That’s because when the IRS sent out stimulus checks, it used the household members listed on the latest tax return, which would have been 2019 for most people who filed on time. As such, qualified families with changed household sizes since their previous tax return missed out on the $500 per child and $1,200 per dependent adults for the first stimulus and $600 per adult and child from the second stimulus.
The stimulus checks were intended to target lower- and middle-class families who were struggling the most through the economic pressures caused by the pandemic. Thresholds for maximum stimulus amounts were set below $75,000 of income per single adult and $150,000 per married couple with stimulus amounts decreasing at higher incomes. However, this failed to account for the people who lost income and dropped into other categories in 2020 despite being above certain thresholds in the previous tax year.
To account for this, the IRS needs to know your actual 2020 adjusted gross income. If you dropped into the range that received more stimulus funds, the difference will be included as part of your tax refund.
On the other hand, if your income increased above the range in 2020 but your 2019 tax filings showed you qualified, you will not have to pay back the IRS.
In some cases, qualified people never received their stimulus check. This was usually chalked up to changes in bank accounts of which the IRS was not notified or “glitches” which listed incorrect banking information. For whatever reason, these people were often not able to resolve the missing stimulus checks at the time, but they will be given the opportunity to claim the funds on their 2020 tax return.
Now is the time to ensure your taxes are done properly. The 2020 tax filing will be the last and only way to ensure you receive the correct stimulus amount.
There is a section in the 2020 tax forms titled “recovery rebate credit,” which should be filled in with the amount you believe you are owed. However, working with an experienced CPA is the surest way to guarantee you will get all of your missing or shorted funds.
The IRS is delaying its acceptance of tax returns by two weeks to prepare for the influx of stimulus claims. The agency is also recommending taxpayers file electronically to speed the approval and distribution of additional stimulus funds.
Apex CPAs and Consultants has its finger on the pulse of today’s economy. More than ever, it is vital to ensure quick and accurate 2020 tax filings, particularly for families who believe they were shorted on last year’s stimulus funds. Your 2020 tax filings may also be used for further government stimulus checks, so it’s important to have all of your information, including banking details, accurate to avoid future issues. With our thorough and precise accounting, you ensure you will get the money you are owed.
We help individuals, families, and businesses near St. Charles, IL get the most of their 2020 tax refunds outside of the stimulus, too. We can account for losses, expenses, and other costs to maximize your tax deductions and minimize tax liabilities. In this economic environment, it is more important than ever for our clients to keep more of their dollars to provide for their families, reinvest in their business, and keep America’s economic engine moving through healthy production and spending.