OK I have been trying to understand how this $1,200 works.... [EDITED} Here is the language from the Sentate bill, the last one I can find that was supposedly signed into law: “SEC. 6428. 2020 RECOVERY REBATES FOR INDIVIDUALS. “(a) In General.—In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by subtitle A for the first taxable year beginning in 2020 an amount equal to the lesser of— “(1) net income tax liability, or “(2) $1,200 ($2,400 in the case of a joint return). I am still trying to make sure I am reading the language of what was actually passed but if i read this correctly, the $1,200 is not a handout from the government that the media and President is making it seem to be, but merely an advance on any refund you would be owed for 2020 tax year. In other words, the government is not giving you $1,200 haha It is giving you YOUR $1,200 and acting like it is doing you some great favor. Anyone else find something different. [Edited] Americans shoudl realize they government created a refund/deduction and is giving it to you earlier.
More info that explains it.. So the government created a tax credit/deduction that every one gets to claim right now nad receive if they qualify per the income rules and receive the check in the mail. The credit will be claimed on your 2020 tax return if you received the check. It is like the government created a deduction and said you can take it now in the form of cash IF you qualify but you must still claim it. Pretty interesting slight of hand for anyone interestedin tax law, which I am. In other words, the government cannot just send you a check. It created a tax credit/deduction and is letting you cash it in now if you qualify. I bet 99% of the people do not know that...I just learned the details. What is an advance tax credit? The stimulus checks are technically an advance of a special tax credit for the 2020 tax year. Some tax credits reduce your overall tax bill — the more credits you claim, the less in taxes you will owe. But other tax credits, such as the Earned Income Tax Credit, are refundable—-meaning that if you don’t owe any federal income taxes, the government sends you a check for the credit. In essence, they’re payments from the government delivered through the Internal Revenue Service. The stimulus payment is a unique fully refundable tax credit. Even if you don’t owe a penny of tax, you get the full $1,200 per person provided you don’t earn too much (and you’re not a dependent who is 17 years old or over). Plus, you’re getting this special tax credit in advance—if the IRS has bank account information for you, you will likely see the stimulus money in your checking account in the next few weeks. (If the IRS has to mail you a check, it will take longer.) Yes, you will technically claim the tax credit on your 2020 taxes, provided you earn enough in 2020 to need to file a tax return. But there won’t be any double dipping here; assuming you already received the money, the credit will basically wash itself out so you won’t be able to benefit from it twice (once in the form of a payment now, and again later to lower your 2020 tax bill).
So suppose you expect (for 2020) to have $50,000 in income. That means you’d owe about $4,300 in taxes. If you paid extra each month and withheld a total of $5,300, you’d get a $1,000 tax refund. With the CARES Act, you receive an additional “credit” for $1,200 and your tax liability is lowered from $4,300 to $3,100. Now, you would expect a $2,200 refund ($5,300 paid minus the $3,100 owed). Instead of paying you $2,200 after taxes in 2021, the IRS is sending you a $1,200 check now, so your actual refund at tax time is still $1,000. Since this is essentially an early tax refund on taxes you will pay in 2020, you don’t have to pay it back and as Senator Dianne Feinstein’s office confirmed, it is not taxed.
I haven't read this portion of the bill, but it's my understanding that it shouldn't affect your future taxes. https://money.com/stimulus-check-advance-tax-refund/ Will this eat into my tax refund for 2020? No. The ‘advance’ you’ve been hearing about is in reference to a special tax credit that’ll appear on the tax return you file in 2021 for the 2020 tax year — a tax credit that wouldn’t have been there if it wasn’t for these stimulus checks. So the Internal Revenue Service isn’t giving you some of your 2020 tax refund upfront. The stimulus check will be in addition to what you would’ve otherwise expected. Will it count towards my taxable income for 2020? No. This money is not considered income. It won’t be taxable and it won’t affect your income tax bracket for 2020.
No. This money is essentially your tax money for next year that the government is just giving back to you early. Interesting, it is your tax money the government just created you are entitled to and is paying it to you now based on your 2019 or 2018 tax filing. If you would not qualify under 2018 tax filing but are out of work now then you are not getting it...not that $1,200 would make a difference really.
Yes it is a very sly way of doing it. The government creates a new deduction for 2020 tax filers who qualify. And then decides it is refundable and will pay you now instead of you getting it in 2021 as a refund on your 2020 tax return. It is basically creating a deduction and letting you advance it right now. It is not really a payout, just some tax accounting.
Problem is the media and the President are not describing it correctly and causing a lot of confusing. Probably 99% don't even understand tax laws or what the language means. I saw some videso on line of people claiming it was an advance on tax liabilities for the next year and they would not be getting any checks becuase it was a scam haha.... It should be explained better to the masses as it is not really a stimulus check but a tax credit.
The stimulus bill allotted $290B for stimulus checks. It's my understanding that the payments are in the form of refundable tax credits and this shouldn't affect your 2020 tax liability. https://www.businessinsider.com/per...eck-cash-payment-wont-lower-tax-refund-2020-4 A tax credit reduces your tax bill on a dollar-for-dollar basis. It's like having store credit at your favorite clothing shop — when you apply it to your total bill, it reduces what you owe. Some tax credits, like the coronavirus recovery rebate, are refundable. That means you'll get the money back in cash even if you don't have enough tax liability to offset it. Importantly, a refundable tax credit will never reduce the size of your refund; it will only increase it. By applying a credit, you're just lowering the amount of taxes you owe. The amount you paid in taxes throughout the year hasn't changed; the IRS will still need to settle the score.
yeah it will be a wash for 2020 when you file. You will claim the deduction/credit on your tax return but since you got it advanced you will not get a second dip by getting to use it again as a means to reduce 2020 income or will you pay taxes on it. Refundable tax credits are owed to you even if you don't claim it as per below. I think in this case, even if you owe money and are not entitled to a refund you still get this one in advance because it still reduces tax liability even if you get no refund. Refundable credits can provide you with a refund Refundable tax credits are called “refundable” because if you qualify for a refundable credit and the amount of the credit is larger than the tax you owe, you will receive a refund for the difference. For example, if you owe $800 in taxes and qualify for a $1,000 refundable credit, you would receive a $200 refund. Like payroll withholding, refundable tax credits are regarded as tax payments. This means that the amount of a refundable tax credit is subtracted from the amount of taxes owed, just like the amount of tax you had withheld from your paycheck. With some of the larger refundable credits, like the Earned Income Tax Credit, the amount of your refund can be substantial. This makes refundable credits some of the most valuable parts of your tax return. Even with zero tax liability, you may still qualify Some taxpayers may find that nonrefundable credits, deductions or other circumstances leave them with zero taxes due. Even with no taxes owed, taxpayers can still apply any refundable credits they qualify for and receive the amount of the credit or credits as a refund. For example, if you end up with no taxes due and you qualify for a $2,000 refundable tax credit, you will receive the entire $2,000 as a refund. For this reason, when doing your taxes, consider calculating any refundable tax credits after figuring in all nonrefundable credits, deductions and tax payments.