The Money Mustache Community
Learning, Sharing, and Teaching => Taxes => Topic started by: jpdx on March 21, 2020, 09:36:28 PM
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Is anyone closely following the proposed rebate payments that the government plans to send every taxpayer?
The Senate GOP's initial plan kinda sucks in that the payment appears to be limited by your 2018 tax liability.
https://www.aei.org/economics/who-would-benefit-from-the-senate-gops-recovery-rebates/
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I read the part of the bill about these payments. The following is my understanding of how it would work.
* It's written as a credit against 2020 taxes.
* There's a rebate check that the Treasury would send everyone based upon how much the credit would have been if it had been law in 2018.
* If the credit based on your 2020 income is more than it was based on your 2018 income, you'll get the difference as a tax refund next spring.
* If the credit based on your 2020 income is less than it was based on your 2018 income, nothing happens. You get to keep the check.
This part of the bill is many pages of pretty dense text with references to many other sections of the tax code. The above summary is definitely incomplete and possibly incorrect in places.
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I read the part of the bill about these payments. The following is my understanding of how it would work.
* It's written as a credit against 2020 taxes.
I've seen this suggestion in a few places, but there's some confusion over it.
Is there to be a tax credit (based on 2020 income) that is "advanced" (based on 2018 income)? Or is it just an advance on any 2020 credit that you would get without changing tax laws at all?
Anyone remember how it was done in 2008? I seem to remember that there was a great uproar when it was discovered at tax time that the stimulus was subtracted from your refund.
But then again, most people fundamentally misunderstand tax refunds in general.
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Is there an income limit for 2018 income in this proposal? What happens to those who earned a good salary in 2018 but lost their jobs now due to coronavirus?
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Is there an income limit for 2018 income in this proposal? What happens to those who earned a good salary in 2018 but lost their jobs now due to coronavirus?
The current senate republican proposal only gives the full payment to people earning $75k/year or less in 2018 and phases out entirely by $99k/year.
Any means testing seems stupid in the situation we currently find ourselves in, but if we were going to do means testing it seems like it would make much more sense to mail out checks to everyone today, and then have the people who earned enough in 2020 not to quality pay it back when they file their 2020 tax return next spring.
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Is there an income limit for 2018 income in this proposal? What happens to those who earned a good salary in 2018 but lost their jobs now due to coronavirus?
The current senate republican proposal only gives the full payment to people earning $75k/year or less in 2018 and phases out entirely by $99k/year.
Any means testing seems stupid in the situation we currently find ourselves in, but if we were going to do means testing it seems like it would make much more sense to mail out checks to everyone today, and then have the people who earned enough in 2020 not to quality pay it back when they file their 2020 tax return next spring.
Have you heard if that's single or MFJ?
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I think that's the single version.
"The rebate checks would begin phasing out for individuals who earned more than $75,000 in 2018 and married couples who made more than $150,000. People who pay little to nothing in income taxes but earned at least $2,500 would get a minimum rebate of $600."
Someone like Seattlecyclone who has read the actual bill probably knows a lot more and may be able to correct me.
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I believe there's at least two bills in Congress, both of which reduce the benefit starting at $75,000/year income and phase it out by $99,000/year - double those limits for married filing jointly (MFJ). Also worth a reminder that pending laws don't mean anything, and this law (as of now) is still pending.
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I'm following the play-by-play closely. The latest iteration of the Senate and House bills keeps the phase-out and removes the phase-in.
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I'll read it again when they pass something. If the phase-out range stays the same it's looking like my family's income was too high in 2018 for us to receive a check. However we have since FIREd and our income will be well below the cutoff this year. If they do keep the basic structure of it being a 2020 tax credit, with a pre-rebate based on 2018 income, I guess we'll just get our money a bit later than most other people.
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Boy I hope they keep the 2020 credit as part of this.
AGI of 99,661 in 2018
I work hourly in live entertainment, completely laid off right now lost at least $30,000 in potential income so far from coronavirus probably more.
Not complaining, but that would be some tough luck to miss it by 661 in 2018 and get nothing when going to make wayyy less than 99,000 in 2020.
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Asking for a friend:
Friend divorced and remarried in 2019, and is worried the funds will be sent to the ex-spouse since things are based on 2018 tax return. Friend has filed their 2019 tax return. Any idea what will happen?
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I've read from CNN article:
"Qualifying income levels will be based on 2019 federal tax returns, if already filed, and otherwise on 2018 returns."
Seems to me that your friend should be okay, maybe?
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I know someone freaking out because they didn't file their 2018 taxes... does he have any hope?
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The Senate passed a bill today. Full text available here (https://www.cnn.com/2020/03/25/politics/read-senate-coronavirus-stimulus-bill/index.html).
The stimulus payments are a bit different from the draft the Republicans put forth a few days ago. It is still written as a one-time tax credit for 2020 only. The base amount of the credit will be $1,200 (or $2,400 to married couples filing jointly), plus $500 per child, phasing out by five cents on the dollar to the extent that your 2020 AGI exceeds $75k (if single), $112.5k (if head of household), or $150k (if married filing jointly).
There will be an advance payment based on your 2019 AGI (if you have filed your 2019 tax return already), or your 2018 AGI (if you haven't), or your 2019 social security or Railroad Retirement wage record (if you haven't filed tax returns for either year).
The 2020 credit will be reduced (but not below zero) by the amount of the advance payment. This means you'll eventually get the payment based on the lower of your 2019 or 2020 income, but only the 2019 income will figure into the immediate payment.
There are a couple of other interesting provisions for individual taxpayers in there.
* Coronavirus-related retirement account distributions. The 10% early withdrawal tax won't apply to retirement plan distributions up to $100k taken out in 2020 for people who have been diagnosed with covid-19, or have experienced adverse financial consequences due to quarantine or reduced work or reduced childcare availability during this time. If you take out one of these distributions you'll have the option of splitting the income over three tax years (2020-2022). Could be worth considering for early retirees who would otherwise use the Roth ladder.
* Certain limits on deductions of charitable contributions are suspended for 2020.
* Up to $300 of charitable contributions can be claimed "above the line" (i.e. even for people who claim the standard deduction).
* RMDs are cancelled for 2020.
Of course this still needs to be passed by the House, but Pelosi seems to be pushing pretty hard for it to pass without further amendment.
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So I'm annoyed, and then embarrassed to be annoyed.
When they first suggested a stimulus check, my immediate thought was "oh I'm good, I don't need that, let needier people have it".
But now that they've defined it, it looks like I may make *just* too much to get it. And I'm annoyed because I realized that if I were still in my former LCoL location, I would be getting it, even though my cash flow situation was actually better down there. The CoL adjustment I got, despite being woefully inadequate, potentially makes the difference between getting about half a check vs. none at all.
So basically, I'm probably getting less money because I'm in a state that costs more to live in.
Also, I realized that I've let my cash holdings erode since I've been in this HCoL metro, so that cash would potentially help me avoid dipping into my investment accounts if something happens. That part is clearly my fault, but it still rubs salt in the wound.
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I'm miffed also. Originally, I didn't care that I made over the threshold. But I was just told yesterday that I will be given a 50% pay cut for next month and possibly the month after.
I am not sure why they couldn't give everyone a check and then if your salary was too high in 2020, then add it to your 2020 taxes. I think someone else mentioned this above. My son (a huge Bernie supporter) said that is what Bernie was suggesting. Oh well, as long as it stimulates the economy as they are suggesting.
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I was also surprised by the emotional impact of being told most americans would be getting a check to help out in these crazy times but I wouldn't. I don't need the money. My job is safe, at least for now. Just feels bad.
I agree with the argument it would have been more popular/more effective/more efficient to just send out the checks to everyone and tax it back from those who made enough money not to need it when people file their 2020 taxes (myself almost certainly included). Would cost the exact same amount of money in the end.
Is the house planning to pass the same bill as the senate? Or will they pass something different and we'll have to go through the reconciliation process and a whole new round of political stand-offs?
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I would happily have a household income of $150k instead of the $2,900 check we're going to get. I don't think people who have had high incomes should complain about not getting anything, since you should have a robust emergency fund in place.
I also feel like AGI is a weird line to use for the threshold. Our AGI is almost $40k lower than our actual income, thanks to pre-tax investing. Total income would be a more sensible measuring stick.
Also, instead of giving checks to everyone who doesn't make a lot of money, why not just use that money to create a really beefed up unemployment system? That ensures that the people hit hardest get the money, while households like mine that don't need it won't get any. This current bill seems like an inefficient use of funds.
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Also, instead of giving checks to everyone who doesn't make a lot of money, why not just use that money to create a really beefed up unemployment system? That ensures that the people hit hardest get the money, while households like mine that don't need it won't get any. This current bill seems like an inefficient use of funds.
The current bill provides an extra $600/week in unemployment regardless of prior income + traditional unemployment which usually replaces about 50% of pay.
So someone working a full time $10/hour job currently makes about $20k/year.
If they were laid off before, they'd receive annualized unemployment income of $10k/year.
Under the bill the senate just passed, if the same person is laid off they will receive annualized unemployment income of $40k/year.
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Also, instead of giving checks to everyone who doesn't make a lot of money, why not just use that money to create a really beefed up unemployment system? That ensures that the people hit hardest get the money, while households like mine that don't need it won't get any. This current bill seems like an inefficient use of funds.
The current bill provides an extra $600/week in unemployment regardless of prior income + traditional unemployment which usually replaces about 50% of pay.
So someone working a full time $10/hour job currently makes about $20k/year.
If they were laid off before, they'd receive annualized unemployment income of $10k/year.
Under the bill the senate just passed, if the same person is laid off they will receive annualized unemployment income of $40k/year.
Sounds like the folks who have the crappiest jobs will get the most help. This is great!!! If they get laid off, they will have the financial wherewithal NOT to take the most awful next job they can find. In addition, they will be around to help any loved ones who may get sick. They will also NOT need to return to work immediately if they are sick themselves.
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The new draft of the bill uses your 2019 tax return if you have filed it, if not, it's basing the payment on your 2018 return.
Washington Post has a calculator: https://www.washingtonpost.com/graphics/business/coronavirus-stimulus-check-calculator/ (https://www.washingtonpost.com/graphics/business/coronavirus-stimulus-check-calculator/)
My question is: We had a baby in January 2020 who is obviously not listed as a dependent on my 2019 tax return. Anyone read anything about how they will handle newborn babies? Will it be adjusted as a tax credit next year, or will there be a petition/amendment process?
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Just wanted to check my understanding of this bill:
-In the 2018 and 2019 tax year, I can be claimed as a dependent (I am over 18, but went to college so the dependent age limit gets extended)
-Next year, I will not be claimed as a dependent
-I would NOT receive any check because I am a dependent
-Parents would NOT receive any check for me because I am not a qualifying child
-Filed/will file as single with an income of less than $75k
-Income for 2019 tax year was over $20k. Income for 2018 tax year was under $10k.
Is that correct based on your understanding of this bill? It seems like I am basically unaccounted for by this bill. I can’t complain as I’m happy to have a job still and am in a good financial situation, but it sucks that 96% (or something like that) of Americans get free money and I don’t.
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Just wanted to check my understanding of this bill:
-In the 2018 and 2019 tax year, I can be claimed as a dependent (I am over 18, but went to college so the dependent age limit gets extended)
-Next year, I will not be claimed as a dependent
-I would NOT receive any check because I am a dependent
-Parents would NOT receive any check for me because I am not a qualifying child
-Filed/will file as single with an income of less than $75k
-Income for 2019 tax year was over $20k. Income for 2018 tax year was under $10k.
Is that correct based on your understanding of this bill? It seems like I am basically unaccounted for by this bill. I can’t complain as I’m happy to have a job still and am in a good financial situation, but it sucks that 96% (or something like that) of Americans get free money and I don’t.
The understanding I have based on my reading of the bill is that dependents of all types do not count as "eligible individuals" who can claim a payment for themselves. The $500 additional payment is not available for all dependents, just those dependents who are eligible for the child tax credit (under age 17). Therefore I think you're right that your parents won't be getting the $500 added to their payment, and you also won't be getting an advance payment because you were a dependent in 2018 and 2019. However I think if you aren't a dependent this year you will be eligible to get a $1,200 credit against your 2020 taxes.
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The new draft of the bill uses your 2019 tax return if you have filed it, if not, it's basing the payment on your 2018 return.
Washington Post has a calculator: https://www.washingtonpost.com/graphics/business/coronavirus-stimulus-check-calculator/ (https://www.washingtonpost.com/graphics/business/coronavirus-stimulus-check-calculator/)
My question is: We had a baby in January 2020 who is obviously not listed as a dependent on my 2019 tax return. Anyone read anything about how they will handle newborn babies? Will it be adjusted as a tax credit next year, or will there be a petition/amendment process?
My guess is that you will soon get a $2,400 payment for you and your spouse based on your 2019 tax situation, and when you do your taxes next spring you'll get to claim an extra $500 for your baby.
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Is the house planning to pass the same bill as the senate? Or will they pass something different and we'll have to go through the reconciliation process and a whole new round of political stand-offs?
Currently it appears that the House will pass it tomorrow. Although predictions are hard, especially about the future ;-)
Is this a non-refundable tax credit?
Appears to me to be refundable based on the language in the bill, but I'm not an expert.
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Just wanted to check my understanding of this bill:
-In the 2018 and 2019 tax year, I can be claimed as a dependent (I am over 18, but went to college so the dependent age limit gets extended)
-Next year, I will not be claimed as a dependent
-I would NOT receive any check because I am a dependent
-Parents would NOT receive any check for me because I am not a qualifying child
-Filed/will file as single with an income of less than $75k
-Income for 2019 tax year was over $20k. Income for 2018 tax year was under $10k.
Is that correct based on your understanding of this bill? It seems like I am basically unaccounted for by this bill. I can’t complain as I’m happy to have a job still and am in a good financial situation, but it sucks that 96% (or something like that) of Americans get free money and I don’t.
If you file for tax year 2020 as a single and make under 75k, you will get a tax credit of $1200. When you realize that tax credit is up to you. If you want to get it sooner, have your employer stop taking out federal income tax from your checks for a while, or change your exemption number. Otherwise you will get it when you file your taxes for 2020, probably next spring, 2021.
So yes, you are accounted for.
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Is this a non-refundable tax credit?
Appears to me to be refundable based on the language in the bill, but I'm not an expert.
That's my feeling as well. The language includes the following bit:
(b) TREATMENT OF CREDIT.—The credit allowed by subsection (a) shall be treated as allowed by subpart C of part IV of subchapter A of chapter 1.
As it turns out, subpart C of part IV of subchapter A of chapter 1 of the tax code (https://www.law.cornell.edu/uscode/text/26/subtitle-A/chapter-1/subchapter-A/part-IV/subpart-C) is entitled "refundable credits," so I'd say that's strong evidence that it's intended to be a refundable tax credit, but I'm not a lawyer.
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Just wanted to check my understanding of this bill:
-In the 2018 and 2019 tax year, I can be claimed as a dependent (I am over 18, but went to college so the dependent age limit gets extended)
-Next year, I will not be claimed as a dependent
-I would NOT receive any check because I am a dependent
-Parents would NOT receive any check for me because I am not a qualifying child
-Filed/will file as single with an income of less than $75k
-Income for 2019 tax year was over $20k. Income for 2018 tax year was under $10k.
Is that correct based on your understanding of this bill? It seems like I am basically unaccounted for by this bill. I can’t complain as I’m happy to have a job still and am in a good financial situation, but it sucks that 96% (or something like that) of Americans get free money and I don’t.
If you file for tax year 2020 as a single and make under 75k, you will get a tax credit of $1200. When you realize that tax credit is up to you. If you want to get it sooner, have your employer stop taking out federal income tax from your checks for a while, or change your exemption number. Otherwise you will get it when you file your taxes for 2020, probably next spring, 2021.
So yes, you are accounted for.
Can someone confirm the following and maybe link to the source of this information?
If a single filer earned >100K in 2018 and 2019 but will earn less than 75K in 2020 they will still receive $1200 but not immediately. They'll get it as a tax credit when they file 2020 taxes in 2021. Is that right?
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Just wanted to check my understanding of this bill:
-In the 2018 and 2019 tax year, I can be claimed as a dependent (I am over 18, but went to college so the dependent age limit gets extended)
-Next year, I will not be claimed as a dependent
-I would NOT receive any check because I am a dependent
-Parents would NOT receive any check for me because I am not a qualifying child
-Filed/will file as single with an income of less than $75k
-Income for 2019 tax year was over $20k. Income for 2018 tax year was under $10k.
Is that correct based on your understanding of this bill? It seems like I am basically unaccounted for by this bill. I can’t complain as I’m happy to have a job still and am in a good financial situation, but it sucks that 96% (or something like that) of Americans get free money and I don’t.
If you file for tax year 2020 as a single and make under 75k, you will get a tax credit of $1200. When you realize that tax credit is up to you. If you want to get it sooner, have your employer stop taking out federal income tax from your checks for a while, or change your exemption number. Otherwise you will get it when you file your taxes for 2020, probably next spring, 2021.
So yes, you are accounted for.
Can someone confirm the following and maybe link to the source of this information?
If a single filer earned >100K in 2018 and 2019 but will earn less than 75K in 2020 they will still receive $1200 but not immediately. They'll get it as a tax credit when they file 2020 taxes in 2021. Is that right?
Correct. The text of the bill clearly creates a tax credit of $1200 for single filers for the 2020 tax year. The checks that would be sent out are an advance refund of that tax credit based on people's tax situation for 2019 (or 2018). It all will be reconciled on the 2020 tax return filed about a year from now.
Source: https://www.scribd.com/document/453273118/Cares-Act-Final-Text, pages 144ff.
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Just wanted to check my understanding of this bill:
-In the 2018 and 2019 tax year, I can be claimed as a dependent (I am over 18, but went to college so the dependent age limit gets extended)
-Next year, I will not be claimed as a dependent
-I would NOT receive any check because I am a dependent
-Parents would NOT receive any check for me because I am not a qualifying child
-Filed/will file as single with an income of less than $75k
-Income for 2019 tax year was over $20k. Income for 2018 tax year was under $10k.
Is that correct based on your understanding of this bill? It seems like I am basically unaccounted for by this bill. I can’t complain as I’m happy to have a job still and am in a good financial situation, but it sucks that 96% (or something like that) of Americans get free money and I don’t.
If you file for tax year 2020 as a single and make under 75k, you will get a tax credit of $1200. When you realize that tax credit is up to you. If you want to get it sooner, have your employer stop taking out federal income tax from your checks for a while, or change your exemption number. Otherwise you will get it when you file your taxes for 2020, probably next spring, 2021.
So yes, you are accounted for.
Can someone confirm the following and maybe link to the source of this information?
If a single filer earned >100K in 2018 and 2019 but will earn less than 75K in 2020 they will still receive $1200 but not immediately. They'll get it as a tax credit when they file 2020 taxes in 2021. Is that right?
Correct. The text of the bill clearly creates a tax credit of $1200 for single filers for the 2020 tax year. The checks that would be sent out are an advance refund of that tax credit based on people's tax situation for 2019 (or 2018). It all will be reconciled on the 2020 tax return filed about a year from now.
Source: https://www.scribd.com/document/453273118/Cares-Act-Final-Text, pages 144ff.
Sorry if I'm being too dense. I just tried to read 144f and couldn't find anything specifically about those who don't qualify based on 2018 and 2019 but will make less than the threshold in 2020. Nothing about them being eligible for the same $1200 per person paid as a tax refund in 2021, not this year. It's written in legalese and very hard to follow.
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Just wanted to check my understanding of this bill:
-In the 2018 and 2019 tax year, I can be claimed as a dependent (I am over 18, but went to college so the dependent age limit gets extended)
-Next year, I will not be claimed as a dependent
-I would NOT receive any check because I am a dependent
-Parents would NOT receive any check for me because I am not a qualifying child
-Filed/will file as single with an income of less than $75k
-Income for 2019 tax year was over $20k. Income for 2018 tax year was under $10k.
Is that correct based on your understanding of this bill? It seems like I am basically unaccounted for by this bill. I can’t complain as I’m happy to have a job still and am in a good financial situation, but it sucks that 96% (or something like that) of Americans get free money and I don’t.
If you file for tax year 2020 as a single and make under 75k, you will get a tax credit of $1200. When you realize that tax credit is up to you. If you want to get it sooner, have your employer stop taking out federal income tax from your checks for a while, or change your exemption number. Otherwise you will get it when you file your taxes for 2020, probably next spring, 2021.
So yes, you are accounted for.
Can someone confirm the following and maybe link to the source of this information?
If a single filer earned >100K in 2018 and 2019 but will earn less than 75K in 2020 they will still receive $1200 but not immediately. They'll get it as a tax credit when they file 2020 taxes in 2021. Is that right?
Correct. The text of the bill clearly creates a tax credit of $1200 for single filers for the 2020 tax year. The checks that would be sent out are an advance refund of that tax credit based on people's tax situation for 2019 (or 2018). It all will be reconciled on the 2020 tax return filed about a year from now.
Source: https://www.scribd.com/document/453273118/Cares-Act-Final-Text, pages 144ff.
Sorry if I'm being too dense. I just tried to read 144f and couldn't find anything specifically about those who don't qualify based on 2018 and 2019 but will make less than the threshold in 2020. Nothing about them being eligible for the same $1200 per person paid as a tax refund in 2021, not this year. It's written in legalese and very hard to follow.
I agree that it's hard to read.
The credit is for tax year 2020. You can see this on page 144 lines 24 and 25.
The advanced refund of this 2020 credit (the stimulus checks) is made based on people's 2019 (or 2018) tax situation. You can see this on page 147 line 1 and on page 149 line 2.
Like nearly everything else in the tax code, whether anyone ultimately qualifies for any particular credit is done on a year-by-year basis. If you didn't have a child in 2018 or 2019, you don't get a child tax credit, but if you have a child in 2020, then you do get to claim the child tax credit (assuming a typical scenario where you qualify). If you're not going to college in 2018 or 2019 and then go to college full time in 2020, then you wouldn't qualify for the AOTC or LLC in the first two years but might in 2020 (again, assuming you meet the requirements).
The same is true of this stimulus payment. The advancing part is just to get the money into people's hands sooner, and they have to have an approximately good way to figure out how to do that, so they're using 2019 as a proxy for 2020. It'll be approximately correct for most folks, but for some people whose situation changed, they'll have to account for the differences between the earlier years and 2020.
HTH, ask more questions if I'm not clear enough.
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* RMDs are cancelled for 2020.
Does this include RMDs for inherited IRAs?
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Just wanted to check my understanding of this bill:
-In the 2018 and 2019 tax year, I can be claimed as a dependent (I am over 18, but went to college so the dependent age limit gets extended)
-Next year, I will not be claimed as a dependent
-I would NOT receive any check because I am a dependent
-Parents would NOT receive any check for me because I am not a qualifying child
-Filed/will file as single with an income of less than $75k
-Income for 2019 tax year was over $20k. Income for 2018 tax year was under $10k.
Is that correct based on your understanding of this bill? It seems like I am basically unaccounted for by this bill. I can’t complain as I’m happy to have a job still and am in a good financial situation, but it sucks that 96% (or something like that) of Americans get free money and I don’t.
If you file for tax year 2020 as a single and make under 75k, you will get a tax credit of $1200. When you realize that tax credit is up to you. If you want to get it sooner, have your employer stop taking out federal income tax from your checks for a while, or change your exemption number. Otherwise you will get it when you file your taxes for 2020, probably next spring, 2021.
So yes, you are accounted for.
Thanks for your reply clarifying this, that makes sense. Stay safe!
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* RMDs are cancelled for 2020.
Does this include RMDs for inherited IRAs?
I believe so. Again, this is some dense text that refers to various numbered sections of the tax code, so there could be something I'm missing, but I believe that all RMDs are suspended for the year.
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I don't understand all the tax terminology and don't have the bandwidth to look it up and figure it out but can someone please clarify:
Is this going to be like the stimulus checks we got (was that 2008?) where it was just an advance on your tax refund and if it turned out you weren't due a refund you had to pay it back when it came time to file taxes? And where if you were due a refund, it reduced the amount you got at tax time?
Thanks in advance!
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I don't understand all the tax terminology and don't have the bandwidth to look it up and figure it out but can someone please clarify:
Is this going to be like the stimulus checks we got (was that 2008?) where it was just an advance on your tax refund and if it turned out you weren't due a refund you had to pay it back when it came time to file taxes? And where if you were due a refund, it reduced the amount you got at tax time?
Thanks in advance!
It's not going to come out of the tax refund that you would have received in absence of this legislation. Instead there's a brand new tax credit being created. If you get a check based on your income last year it will cancel out this new tax credit.
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I don't understand all the tax terminology and don't have the bandwidth to look it up and figure it out but can someone please clarify:
Is this going to be like the stimulus checks we got (was that 2008?) where it was just an advance on your tax refund and if it turned out you weren't due a refund you had to pay it back when it came time to file taxes? And where if you were due a refund, it reduced the amount you got at tax time?
Thanks in advance!
It's not going to come out of the tax refund that you would have received in absence of this legislation. Instead there's a brand new tax credit being created. If you get a check based on your income last year it will cancel out this new tax credit.
So therefore...and this is going to show my ignorance but I'll ask it anyway...is there a scenario in which you would have to 'pay it back' (I know that's not the right term because it's a credit but it's the best I can think of) out of your taxes another year? I think you just answered and said no but I want to make sure I'm understanding it correctly.
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I don't understand all the tax terminology and don't have the bandwidth to look it up and figure it out but can someone please clarify:
Is this going to be like the stimulus checks we got (was that 2008?) where it was just an advance on your tax refund and if it turned out you weren't due a refund you had to pay it back when it came time to file taxes? And where if you were due a refund, it reduced the amount you got at tax time?
Thanks in advance!
It's not going to come out of the tax refund that you would have received in absence of this legislation. Instead there's a brand new tax credit being created. If you get a check based on your income last year it will cancel out this new tax credit.
So therefore...and this is going to show my ignorance but I'll ask it anyway...is there a scenario in which you would have to 'pay it back' (I know that's not the right term because it's a credit but it's the best I can think of) out of your taxes another year? I think you just answered and said no but I want to make sure I'm understanding it correctly.
From my understanding, if your income increases from below the threshold in 2018/2019 to above it in 2020, you could end up owing part or all of the credit back.
Edit: you would not have to pay it back.
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So I'm annoyed, and then embarrassed to be annoyed.
When they first suggested a stimulus check, my immediate thought was "oh I'm good, I don't need that, let needier people have it".
But now that they've defined it, it looks like I may make *just* too much to get it. And I'm annoyed because I realized that if I were still in my former LCoL location, I would be getting it, even though my cash flow situation was actually better down there. The CoL adjustment I got, despite being woefully inadequate, potentially makes the difference between getting about half a check vs. none at all.
So basically, I'm probably getting less money because I'm in a state that costs more to live in.
Also, I realized that I've let my cash holdings erode since I've been in this HCoL metro, so that cash would potentially help me avoid dipping into my investment accounts if something happens. That part is clearly my fault, but it still rubs salt in the wound.
Living somewhere HCOL is rough. My state also has high taxes. And college financial aid doesn't account for any of this.
The moral is that living in a HCOL area is only rational if you have a high income job you wouldn't get elsewhere or it's a luxury good that you accept.
I will say people in HCOL areas often adjust by purchasing smaller houses but that can only offset so much. My small house was still pretty expensive.
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The stimulus payments are a bit different from the draft the Republicans put forth a few days ago. It is still written as a one-time tax credit for 2020 only. The base amount of the credit will be $1,200 (or $2,400 to married couples filing jointly), plus $500 per child, phasing out by five cents on the dollar to the extent that your 2020 AGI exceeds $75k (if single), $112.5k (if head of household), or $150k (if married filing jointly).
There will be an advance payment based on your 2019 AGI (if you have filed your 2019 tax return already), or your 2018 AGI (if you haven't), or your 2019 social security or Railroad Retirement wage record (if you haven't filed tax returns for either year).
The 2020 credit will be reduced (but not below zero) by the amount of the advance payment. This means you'll eventually get the payment based on the lower of your 2019 or 2020 income, but only the 2019 income will figure into the immediate payment.
Weird, so if someone had a big jump in income from 2018 to 2020 (for easy math, let's say $50k to $500k as a family), they are going to get a payment of $2400 based on their 2018 taxes and then when they file 2020, owe it all back? I guess most people don't understand how taxes work so they won't be miffed by this.
Basically if your AGI is $198k / $99k you are phased out entirely unless you have kids (where it still phases it but slower, it looks like the $1200/$500 are summed together so if you had 10 kids you'd have a $148k phase out range, so as a married couple you could make $298k before it phases out).
AGI is a lot worse than MAGI for this.
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Fully funding my 401(k) -- on top of getting a government 457 plan -- and getting a 6k spousal deduction for an IRA contribution (later converted to ROTH) is going to net us a thousand or so extra dollars if the phase-out version of this bill passes.
By keeping your AGI down, saving in retirement accounts really is a gift that keeps on giving.
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I don't understand all the tax terminology and don't have the bandwidth to look it up and figure it out but can someone please clarify:
Is this going to be like the stimulus checks we got (was that 2008?) where it was just an advance on your tax refund and if it turned out you weren't due a refund you had to pay it back when it came time to file taxes? And where if you were due a refund, it reduced the amount you got at tax time?
Thanks in advance!
It's not going to come out of the tax refund that you would have received in absence of this legislation. Instead there's a brand new tax credit being created. If you get a check based on your income last year it will cancel out this new tax credit.
So therefore...and this is going to show my ignorance but I'll ask it anyway...is there a scenario in which you would have to 'pay it back' (I know that's not the right term because it's a credit but it's the best I can think of) out of your taxes another year? I think you just answered and said no but I want to make sure I'm understanding it correctly.
From my understanding, if your income increases from below the threshold in 2018/2019 to above it in 2020, you could end up owing part or all of the credit back.
This is incorrect. If your advance payment of the credit (based on 2019/2018 income) is more than you end up being entitled to (based on 2020 income), then you will *not* be required to pay back any excess you received.
The stimulus payments are a bit different from the draft the Republicans put forth a few days ago. It is still written as a one-time tax credit for 2020 only. The base amount of the credit will be $1,200 (or $2,400 to married couples filing jointly), plus $500 per child, phasing out by five cents on the dollar to the extent that your 2020 AGI exceeds $75k (if single), $112.5k (if head of household), or $150k (if married filing jointly).
There will be an advance payment based on your 2019 AGI (if you have filed your 2019 tax return already), or your 2018 AGI (if you haven't), or your 2019 social security or Railroad Retirement wage record (if you haven't filed tax returns for either year).
The 2020 credit will be reduced (but not below zero) by the amount of the advance payment. This means you'll eventually get the payment based on the lower of your 2019 or 2020 income, but only the 2019 income will figure into the immediate payment.
[1] Weird, so if someone had a big jump in income from 2018 to 2020 (for easy math, let's say $50k to $500k as a family), they are going to get a payment of $2400 based on their 2018 taxes and then when they file 2020, owe it all back? I guess most people don't understand how taxes work so they won't be miffed by this.
[2] Basically if your AGI is $198k / $99k you are phased out entirely unless you have kids (where it still phases it but slower, it looks like the $1200/$500 are summed together so if you had 10 kids you'd have a $148k phase out range, so as a married couple you could make $298k before it phases out).
AGI is a lot worse than MAGI for this.
[Numbers added for reference.]
[1] Incorrect. See comment above under previous post. In this scenario, the couple would keep the $2400 and not have to pay it back.
[2] This is not correct. The phaseout ranges are solely based on filing status and are completely independent of the number of dependents. So a single filer under $75K of AGI would get $1200, plus $500 times the number of dependents. A married couple making $298K with 10 kids would get $0 of their $2400, but would get $5000 for the 10 kids.
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I don't understand all the tax terminology and don't have the bandwidth to look it up and figure it out but can someone please clarify:
Is this going to be like the stimulus checks we got (was that 2008?) where it was just an advance on your tax refund and if it turned out you weren't due a refund you had to pay it back when it came time to file taxes? And where if you were due a refund, it reduced the amount you got at tax time?
Thanks in advance!
It's not going to come out of the tax refund that you would have received in absence of this legislation. Instead there's a brand new tax credit being created. If you get a check based on your income last year it will cancel out this new tax credit.
So therefore...and this is going to show my ignorance but I'll ask it anyway...is there a scenario in which you would have to 'pay it back' (I know that's not the right term because it's a credit but it's the best I can think of) out of your taxes another year? I think you just answered and said no but I want to make sure I'm understanding it correctly.
From my understanding, if your income increases from below the threshold in 2018/2019 to above it in 2020, you could end up owing part or all of the credit back.
This is incorrect. If your advance payment of the credit (based on 2019/2018 income) is more than you end up being entitled to (based on 2020 income), then you will *not* be required to pay back any excess you received.
The stimulus payments are a bit different from the draft the Republicans put forth a few days ago. It is still written as a one-time tax credit for 2020 only. The base amount of the credit will be $1,200 (or $2,400 to married couples filing jointly), plus $500 per child, phasing out by five cents on the dollar to the extent that your 2020 AGI exceeds $75k (if single), $112.5k (if head of household), or $150k (if married filing jointly).
There will be an advance payment based on your 2019 AGI (if you have filed your 2019 tax return already), or your 2018 AGI (if you haven't), or your 2019 social security or Railroad Retirement wage record (if you haven't filed tax returns for either year).
The 2020 credit will be reduced (but not below zero) by the amount of the advance payment. This means you'll eventually get the payment based on the lower of your 2019 or 2020 income, but only the 2019 income will figure into the immediate payment.
[1] Weird, so if someone had a big jump in income from 2018 to 2020 (for easy math, let's say $50k to $500k as a family), they are going to get a payment of $2400 based on their 2018 taxes and then when they file 2020, owe it all back? I guess most people don't understand how taxes work so they won't be miffed by this.
[2] Basically if your AGI is $198k / $99k you are phased out entirely unless you have kids (where it still phases it but slower, it looks like the $1200/$500 are summed together so if you had 10 kids you'd have a $148k phase out range, so as a married couple you could make $298k before it phases out).
AGI is a lot worse than MAGI for this.
[Numbers added for reference.]
[1] Incorrect. See comment above under previous post. In this scenario, the couple would keep the $2400 and not have to pay it back.
[2] This is not correct. The phaseout ranges are solely based on filing status and are completely independent of the number of dependents. So a single filer under $75K of AGI would get $1200, plus $500 times the number of dependents. A married couple making $298K with 10 kids would get $0 of their $2400, but would get $5000 for the 10 kids.
Thanks for clarification. I'll amend my comment so that confusion is avoided.
I also verified via the Google machine:
If the numbers on your 2020 tax return suggest that you got more than you should because of your income, you should not have to pay it back.
Source: https://www.forbes.com/sites/kellyphillipserb/2020/03/25/all-you-wanted-to-know-about-those-tax-stimulus-checks-but-were-afraid-to-ask/#7e1833e1f9c9
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[1] Weird, so if someone had a big jump in income from 2018 to 2020 (for easy math, let's say $50k to $500k as a family), they are going to get a payment of $2400 based on their 2018 taxes and then when they file 2020, owe it all back? I guess most people don't understand how taxes work so they won't be miffed by this.
[2] Basically if your AGI is $198k / $99k you are phased out entirely unless you have kids (where it still phases it but slower, it looks like the $1200/$500 are summed together so if you had 10 kids you'd have a $148k phase out range, so as a married couple you could make $298k before it phases out).
AGI is a lot worse than MAGI for this.
[Numbers added for reference.]
[1] Incorrect. See comment above under previous post. In this scenario, the couple would keep the $2400 and not have to pay it back.
[2] This is not correct. The phaseout ranges are solely based on filing status and are completely independent of the number of dependents. So a single filer under $75K of AGI would get $1200, plus $500 times the number of dependents. A married couple making $298K with 10 kids would get $0 of their $2400, but would get $5000 for the 10 kids.
I'm curious where you are reading this from the doc. I'm trying to read this, perhaps against what is reasonable :-)
[1] All the citations you had appear to me to reference early payment logistics, not the actual tax year for the credit - what am I missing here?
[2] page 145 line numbers 10-15 seems to reference the entire payment total. Is there a different section distinguishing these categories phase out?
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[1] Weird, so if someone had a big jump in income from 2018 to 2020 (for easy math, let's say $50k to $500k as a family), they are going to get a payment of $2400 based on their 2018 taxes and then when they file 2020, owe it all back? I guess most people don't understand how taxes work so they won't be miffed by this.
[2] Basically if your AGI is $198k / $99k you are phased out entirely unless you have kids (where it still phases it but slower, it looks like the $1200/$500 are summed together so if you had 10 kids you'd have a $148k phase out range, so as a married couple you could make $298k before it phases out).
AGI is a lot worse than MAGI for this.
[Numbers added for reference.]
[1] Incorrect. See comment above under previous post. In this scenario, the couple would keep the $2400 and not have to pay it back.
[2] This is not correct. The phaseout ranges are solely based on filing status and are completely independent of the number of dependents. So a single filer under $75K of AGI would get $1200, plus $500 times the number of dependents. A married couple making $298K with 10 kids would get $0 of their $2400, but would get $5000 for the 10 kids.
I'm curious where you are reading this from the doc. I'm trying to read this, perhaps against what is reasonable :-)
[1] All the citations you had appear to me to reference early payment logistics, not the actual tax year for the credit - what am I missing here?
[2] page 145 line numbers 10-15 seems to reference the entire payment total. Is there a different section distinguishing these categories phase out?
Sure. My replies below will reference this document, which is the latest copy of the bill I'm aware of: https://www.documentcloud.org/documents/6819239-FINAL-FINAL-CARES-ACT.html
1. It's embedded in the phrase "but not below zero" on page 146 lines 11 and 12. Meaning that the credit you claim on your 2020 tax return will be reduced by any advance check you get, but not below zero. So if you got a $2400 check based on your 2018 AGI but were entitled to, say, $500, then your credit would be $500-$2400=$-1900 but the phrase "not below zero" would kick in and raise that -$1900 to $0.
2. After review, I think you're right. The total credit is $1200 or $2400 plus $500 for each kid, and that total credit is reduced above the AGI limits at a 5% rate. My bad.
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I have family on SSDI and another on SSI. They don't normally file tax returns. From what I'm seeing they should both get the payment? I think the one on SSDI probably gets a 1099SA just like a retiree, which should mean no return needed. What about the one on SSI?
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My ex-husband and I filed jointly for 2019, but next year for 2020 taxes, we will file separately. Should we just split the rebate check. When we file next year, what will happen?
Thanks for your help...we want to make sure we handle this correctly for both of us.
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My ex-husband and I filed jointly for 2019, but next year for 2020 taxes, we will file separately. Should we just split the rebate check. When we file next year, what will happen?
Thanks for your help...we want to make sure we handle this correctly for both of us.
The way the law is written $1200 is yours and $1200 is his. So if you get a rebate check, the fair and proper thing to do will be to divide it equally. I think the rebate check would have both your names on it, so the bank should require both your signatures. However, if you put bank account information on your 2019 return, then the IRS will preferentially attempt to direct deposit the money into that bank account.
If you get the full $2400 based on your 2019 return, then when you file separately in 2020 you each will get a $1200 credit, which will be zeroed out by your half of the rebate check, so it should be a non-event.
All the previous is based on the federal government and IRS point of view. If you're getting divorced, it's possible that the terms of your divorce decree may affect what happens to money that comes into your household.
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I haven't filed 2019 yet.
If I get the full $1200 based on 2018 numbers, but qualify for less based on 2019 numbers, will I have to "pay back" the extra in 2020?
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I haven't filed 2019 yet.
If I get the full $1200 based on 2018 numbers, but qualify for less based on 2019 numbers, will I have to "pay back" the extra in 2020?
You don't have to pay anything back if your income goes up. I would recommend waiting to file your 2019 taxes until after you receive your payment.
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I haven't filed 2019 yet.
If I get the full $1200 based on 2018 numbers, but qualify for less based on 2019 numbers, will I have to "pay back" the extra in 2020?
You don't have to pay anything back if your income goes up. I would recommend waiting to file your 2019 taxes until after you receive your payment.
Just to clarify: You don't have to pay it back based on your 2019 figures if they turn out higher. But the final amount of the credit is determined by your 2020 figures, so you may have to pay back if you miraculously had a higher income in 2020.
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I haven't filed 2019 yet.
If I get the full $1200 based on 2018 numbers, but qualify for less based on 2019 numbers, will I have to "pay back" the extra in 2020?
You don't have to pay anything back if your income goes up. I would recommend waiting to file your 2019 taxes until after you receive your payment.
Just to clarify: You don't have to pay it back based on your 2019 figures if they turn out higher. But the final amount of the credit is determined by your 2020 figures, so you may have to pay back if you miraculously had a higher income in 2020.
Emphasis added.
While it is true that the actual credit will be determined by your 2020 AGI, if the advance stimulus check amount is greater, then you will *not* have to pay back any excess.
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Right, that's where the "not less than zero" clause comes into play. Your advance payment will count against your 2020 credit, but won't reduce it below zero. In essence you'll get the credit based on whichever of your 2019 or 2020 tax situation results in the highest amount.
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Jeremy from Go Curry Cracker mentioned that he thought children born in 2020 might be eligible for the $500 credit, does anyone know if this is the case? He didn't post any relevant lines from the bill to support this.
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Jeremy from Go Curry Cracker mentioned that he thought children born in 2020 might be eligible for the $500 credit, does anyone know if this is the case? He didn't post any relevant lines from the bill to support this.
They generally would, because they'd be dependents under age 17. Assuming they had an SSN and their parents' 2020 AGI was in the appropriate range.
The credit would not be part of the advance stimulus check, but would instead be taken on the parents' 2020 tax return.
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Punished again for being responsible and working hard. I can't wait to FIRE and live off of everyone else working.
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Looking for opinions on what to do about college student. I have not yet filed my 2019 taxes. My daughter (age 20 now) left college after spring semester in 2019. She worked FT for the remainder of the year, earning around 20k. She returned to college FT in January 2020.
I haven't filed my 2019 taxes yet nor has she. I am considering not claiming her as a dependent for 2019 as she provided more than 50% of her own support. The tuition for the 2019 spring semester was paid in full by me in December of 2018. Her tuition for the spring 2020 semester was paid in full by me in January of 2020. I made no tuition payments during 2019.
So would she qualify for the $1200 stimulus if I do not claim her as a dependent on my 2019 taxes? I will end up increasing my tax liability for 2019 by $500 if I do not claim her but she will in turn receive $1200. Am I missing anything? Is it too late to file and have our 2019 numbers used for immediate stimulus payment instead of 2018? WWYD?
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Looking for opinions on what to do about college student. I have not yet filed my 2019 taxes. My daughter (age 20 now) left college after spring semester in 2019. She worked FT for the remainder of the year, earning around 20k. She returned to college FT in January 2020.
I haven't filed my 2019 taxes yet nor has she. I am considering not claiming her as a dependent for 2019 as she provided more than 50% of her own support. The tuition for the 2019 spring semester was paid in full by me in December of 2018. Her tuition for the spring 2020 semester was paid in full by me in January of 2020. I made no tuition payments during 2019.
So would she qualify for the $1200 stimulus if I do not claim her as a dependent on my 2019 taxes? I will end up increasing my tax liability for 2019 by $500 if I do not claim her but she will in turn receive $1200. Am I missing anything? Is it too late to file and have our 2019 numbers used for immediate stimulus payment instead of 2018? WWYD?
You can determine if she provided more than half of her own support by going to Worksheet 2 in IRS Pub 501. The exact rules for filling it out are not clear, but you may need to put the expenses for her 2019 spring semester on line 15 even though you paid them in 2018, since it's asking for the expenses, which were incurred in 2019, not the payments, which were made in 2018. Note that in general the support test hinges on who paid for the basics of living, not how much she made.
If she provided more than half of her own support, then she does not qualify as your dependent child nor as your dependent relative because she fails the support test.
If she is not your dependent in 2019, you would not list her and she could file her own return. You would lose the $500 credit for other dependents and she would receive the $1200 (assuming she otherwise qualifies; a 20 year old college student typically would).
I don't know if it's too late to file. The direct deposits are supposed to be going out next week, but they haven't said if they're going to do any sort of "mop up" activities for people who are in your situation and are filing 2019 returns over the next few months. I would guess they would, but I don't know for sure. If at all possible, I would encourage you and your daughter to file electronically because electronic returns are received and processed by the IRS much more quickly than paper returns.
I would recommend following the fact pattern and filing as appropriate. Do note that if your daughter cannot be claimed as your dependent in 2020, she can file and get the $1200 payment on her 2020 return which she files approximately a year from now. She would still get the money in that scenario, however it would be up to a year later than the stimulus check.
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We already filed taxes for 2019 and got the money back. Would it worth filing an amendment to take my mom out as a dependent so she can claim the $1200 check.
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We already filed taxes for 2019 and got the money back. Would it worth filing an amendment to take my mom out as a dependent so she can claim the $1200 check.
If someone can be claimed as a dependent, they are ineligible for the payment whether they are claimed or not.
See (d)(2) under SEC. 6428. 2020 Recovery Rebates for individuals (https://www.congress.gov/bill/116th-congress/house-bill/748/text#toc-H25CA409D9D2844399CF965A38F83F6C6).
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Has anyone received the direct deposit yet?
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Has anyone received the direct deposit yet?
I see it as a pending deposit as of today yes.
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While it is true that the actual credit will be determined by your 2020 AGI, if the advance stimulus check amount is greater, then you will *not* have to pay back any excess.
This seems very bizarre to me, but I read more and it checks out. Thanks for teaching me something!
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Got mine today.
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I have not received it yet, and it turns out the IRS portal says they do not have my bank account information. This is despite including it in my 2019 return and paying my tax due electronically.
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I have not received it yet, and it turns out the IRS portal says they do not have my bank account information. This is despite including it in my 2019 return and paying my tax due electronically.
I don't know if this is your situation, but they seem to make a distinction between bank information entered for payment and bank information entered for refund. They're only depositing into accounts entered for refund. There must be some rule or policy they have about this.
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I have not received it yet, and it turns out the IRS portal says they do not have my bank account information. This is despite including it in my 2019 return and paying my tax due electronically.
I don't know if this is your situation, but they seem to make a distinction between bank information entered for payment and bank information entered for refund. They're only depositing into accounts entered for refund. There must be some rule or policy they have about this.
I received a refund and give them information for DD for my taxes. When I logged in to check on the stimulus check status, I was told they didn't have my information. I added it so it should be on it's way, but I feel like I'm further back in the line that I should have been.
n=1 and all, but still. not cool man.