EDITED: CLOSE PLEASE Tax Credit misunderstanding
isaiah58
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EDITED: I found a few answers, had to dig for them. They say that a Stimulus Credit is reported but not as income. They are using your 2019 Income if you already filed, or 2018 if you did not. There is a small potential that if your 2019 income is substantially more than 2018, and you have not filed yet, then there could be an offset calculated when you file your 2020 taxes. Thanks for your responses.
Before planning what you might do with your check:
Reading the few details that explain the potential Stimulus Check, from the bill that the Senate still has to vote on, I found several that expanded on the details. I am not asking to discuss opinions on the politics of this, just stating what this is going to potentially be.
Is a Tax Credit a Tax Advance? Does it get paid back, one way or another?
Found online: Will the IRS Take My Check If I Owe Back Taxes?
Stimulus money is generally not subject to reduction or offset to pay back taxes or other debts owed to the federal government.
How will this affect next years tax returns? In simple terms, lets say as an individual someone expects to get a $1,000 refund next year. Will you deduct the $1,200 and only receive $200. If someone under the new system would have received nothing back, then they will they deduct the $1,200 from nothing and owe $1,200? If you owe back taxes, even if you see the $1,200 applied, will you will still pay it back?
Comments
Well... looks like a lose/lose situation.... a net gain of zero for people getting checks....Cheers, RickO
Do you have a link to where you found this info?
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That would only be if you owed taxes.
That’s not what I read. It should be counted as a rebate not a income not a tax advance. It is a tax credit
If it is simply an advance, how would it be considered a funding expense? It should be a net zero for the government, assuming those who owe on their income taxes actually pay the $1200 back. In that case it is simply an interest free loan of $1200.
That’s my understanding as well. It will be a rebate like what was done in 2008. Otherwise it would be characterized, really, as a loan.
It is a tax advance if you make less than 75k (single) or 150k (couple) a year. If you make more than 100k/200k, then you have to pay it all back over a course of up to 3 years. Between the 75k/100k and 150k/200k thresholds, it is a sliding scale.
At least that was the last proposal I saw.
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Cut the bottom foot off a blanket and sew it on the top and tell me I have a bigger blanket?
What if you just don't cash the check?
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"The stimulus money is technically a tax credit for 2020 that will be paid out, in advance, as soon as possible. "
https://news.yahoo.com/coronavirus-stimulus-checks-eligibility-relief-payment-234022608.html?.tsrc=daily_mail&uh_test=1_04
If I misunderstand what this means, I will edit the OP accordingly. Thanks
I cannot find any further validation of that claim and no sources are listed.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
From the link.
"The stimulus money is technically a tax credit for 2020 that will be paid out, in advance, as soon as possible. “For the vast majority of Americans, no action on their part will be required in order to receive a rebate check as IRS will use a taxpayer’s 2019 tax return if filed, or in the alternative their 2018 return,” a summary of the legislation says."
Looks to me like it won't be taxable as misc or other income. It is a tax credit advance not a tax advance. Tax credits reduce you tax obligation.
Maybe I’m missing it, but I didn’t see anything in that article indicating that you have to pay it back in any form.
That is still confusing to me. A standard Tax Credit is simple, it is indeed a credit you use to adjust your taxes. Since this is being paid up front, it does not seem to make sense to also be able to apply a tax credit next year. Do we report the payment on next years taxes, then apply a tax credit against it?
Different take here, main point of the OP's post is not quite accurate. The vast majority of recipients will NOT pay stimulus back "one way or another".
As I read other sources, the stimulus amount an individual (or couple) receives is based on 2020 income (year stimulus is based on), BUT the government is calculating how much to $s send now based on 2019 or 2018 tax return AGI #s. Therefore only if 2020 adjusted gross INCOME (AGI) is quite different than the base return used to calculate, i.e. above AGI phaseout threshold or max. amounts, would some portion of stimulus check be paid back. Conversely, it is likely that a n AGI drop in 2020 could take one out of phaseout into qualifying for stimulus $s.
It appears to me that this govt. payment is being treated like Affordable Care (Obamacare) payments to heath insurance companies. An Obamacare recipient reconciles their income on their tax return to confirm they qualified for the advance payment their insurance company received in their behalf.
Well if it's just a 2020 tax refund advance and you died from the virus before your 2020 filing does it really matter?
I'm sorta confused like you are since I wasn't aware there was a tax credit being planned for next year. I guess if it does get paid we will have to see what the 2020 version of the 1040 form shows.
I'm not sure that the op's source is accurate, the plan still has to pass the house and could be changed so its premature at this point to say what/how this will affect future tax returns.
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I have not read the bill but have also heard the rumors that it is a credit.
For those who have never dealt with one it might be a bit confusing, but the result is that a refundable tax credit is like a payment towards your taxes that you did not make yourself (Uncle Sam did). If it results in an overpayment of taxes, you get a refund, if you still fall short you owe taxes but it is reduced by the credit amount.
I am not sure exactly how the accounting will be on next year's taxes, but it is not a "loan" by any means. It is just good old-fashioned "free money" ("free" being the controversial term).
I guess that I am the goat.
I already mailed in my taxes.
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