06 Jan 2021 Dec. 2020 Stimulus Payments
Posted at 19:21h in Uncategorized
Recovery Rebate Stimulus Payments and Credits
December 2020 Stimulus Payments
- The bill provides a refundable tax credit in the amount of $600 per eligible family member. The credit is $600 per taxpayer ($1,200 for married taxpayers filing jointly), in addition to $600 per qualifying child. The credit phases out starting at $75,000 of modified adjusted gross income ($112,500 for heads of household and $150,000 for married taxpayers filing jointly) at a rate of $5 per $100 of additional income. Treasury is authorized to issued advance payments of this credit (economic impact payments) in the same way it made stimulus payments under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
- Payments began being deposited in Taxpayer bank accounts on December 29, 2020 and will continue until January 15, 2021, the deadline date set in the Act as the final day to disburse funds. If you don’t get the Recovery Rebate by January 15th, or shortly thereafter, you will need to claim it on your 2020 tax return.
- The House voted to increase the direct payments in the year-end coronavirus relief bill to $2,000 and this was held up in the Senate.
- The IRS has updated its FAQ’s.
2020 Tax Form Reporting of the Stimulus Payments
- On page two of Form 1040, Line 30 has been added to report the “Recovery rebate credit. See instructions.” There is a separate reconciliation schedule where any excess credit over the amount received in mid-2020 as an advance will be calculated and carried over to line 30.
- Example: Pat and Chris had a baby in 2020. They are entitled to a $2,900 Recovery Rebate Credit. They received an advance of $2,400 in June 2020. When they file their 2020 tax return, Chris and Pat are entitled to a $500 credit on Line 30. Any shortage in the December advance will also be computed here.
- In order to accurately complete your 2020 Form 1040, you need a record of how much you received for each of the Stimulus Payments.
- Both credits begin to phase-out for AGI that exceeds $150,000 for taxpayers filing a joint return, $112,500 for taxpayers filing as head of household, and $75,000 for all others.
- The 2020 refundable credits are reduced by any economic impact payment that was received in advance during 2020 based upon the taxpayer’s 2018 or 2019 tax returns or based upon Social Security or Railroad Retirement benefits received. If the economic impact payment received exceeds the 2020 credit allowed (for example, AGI increases during 2020 or a dependent turns age 17 during 2020), the taxpayer is not required to repay the excess amount. The same applies if a taxpayer did not receive the full Stimulus Payments (or received partial payments) because their 2018 or 2019 exceeded the income limits, but their income in 2020 was within the limits, then they will receive a credit on their Form 1040.
- The Economic Impact Payments are not taxable income.