Jo Willetts, EA
Director, Tax Resources
Published on: April 01, 2020
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As the federal government manages its on-going and rapidly evolving response to the coronavirus epidemic, a variety of solutions including an additional $300 unemployment per week, an extension to March 12, 2021 for self-employed taxpayers to collect unemployment, and extension implementing paid leave for some workers and tax credits for small businesses, and an additional $900 billion stimulus plan to continue to bolster the U.S. economy has been passed as part of the 2021 budget. As a part of the recently passed COVID-Related Tax Relief Act of 2020 (COVIDTRA 2020), qualifying taxpayers should receive a second stimulus check in the near future.
While information is changing rapidly, we’re answering some frequently asked questions about the second round of stimulus payments.
An individual must:
Add $12,000 to the phase out amount for each dependent child under age 17 (eligible child)
Based on the legislation, the amount an individual will receive is based on adjusted gross income, filing status, and number of children that qualify for the child tax credit. As outlined, single taxpayers with an AGI of or less $75,000 or $112,500 or less if filing as the Head of Household on their most recent tax return should be eligible for $600. These taxpayers are also eligible for an additional $600 for each dependent child under 17. Taxpayers who are married filing jointly and have an AGI of $150,000 or less should be eligible for $1,200 and an additional $600 for each dependent child under age 17.
The exact amount a specific taxpayer will receive is determined by the IRS. Use our Stimulus Calculator to see how much you may get.
Taxpayers with an AGI above these thresholds may also be eligible for stimulus funds under a “phase-out” calculation method. However, these calculations are more complex and are more dependent on individual circumstances. The phase-out is based on a taxpayer’s AGI, filing status, and number of children that qualify for the child tax credit. Single filers with income exceeding $87,000 and $186,000 for joint filers with no children are not eligible. Income such as wages, interest, self-employment income, pension income is all reported on the tax return and is part of the Adjusted Gross Income (AGI).
Economic impact payments (EIP) – commonly referred to as stimulus payments –are not taxable and should not be reported as income. IRS Notice 1444 identifies the amount of the payment you were issued and the method by which that payment was made. The notice was sent to your last address on file in IRS records within 15 days of payment issuance.
The IRS will be working directly with the Social Security Administration and the Railroad Retirement Board to send the stimulus checks directly to individuals who receive benefits. These taxpayers do not have to file a tax return unless they are married to an individual who does not receive benefits and is not otherwise required to file or if they have dependent children under age 17. If they met these exceptions for round one, they should get a stimulus check.
Here are a few filing scenarios and answers as examples:
Yes, the IRS will pay the stimulus for the taxpayer with an SSN and $600 for each eligible child. If the taxpayer with an SSN is in the military and their spouse has an ITIN, they will start with the $600 plus $1,800 for the eligible children ($600 per child).
While the IRS will send the taxpayer’s their stimulus payment based on their Social Security Benefits, the taxpayer must file a zero income return with the eligible children in order to receive payment for them.
Yes, taxpayers who are filing separate returns will get their stimulus payments, assuming they have an SSN, are not a dependent of another taxpayer and have an AGI of less than $87,000 (or greater if they have eligible children on their tax return).
If they received a stimulus payment in round one they will in round two. If they didn’t receive one in round one but should, they may have to file a tax return to receive their full stimulus benefits.
When the taxpayer files their tax return in 2020 they will use the Recovery Rebate Credit worksheet to reconcile their stimulus payment against their eligible credit. If they are owed any payment, it will be included as a refundable credit on the return and potentially included as part of the taxpayer’s refund.
Taxpayers who receive Social Security or Railroad Retirement Benefits do not need to file a return, unless they are otherwise required to. As long as they filed their non-file return for the first stimulus, they will get their second one.
The IRS is has the “Get My Payment” application on irs.gov.
If you received a stimulus payment the first time, you should be in line to receive one this time as well.
To be eligible to receive stimulus funds from the IRS, at least one taxpayer on the return must have a Social Security Number that is eligible for work in the U.S (eligible SSN). Additionally, all eligible children must have a SSN or an Adoption Taxpayer Identification Number (ATIN).
The stimulus payment is not connected to taxes paid or refund received. Instead they are available to everyone at the rate of $600 for each taxpayer on a return ($1,200 for filing a joint return) and $600 for each eligible child. If a taxpayer’s income is at the threshold for their status, $75,000 for single (including married filing separately and qualifying widow), $112,500 for head of household, and $150,000 for married filing jointly, the amount of the stimulus check starts phasing out.
Under the legislation, any tax debt owed to the IRS or a state or local taxing authority is not allowed to be withheld from Stimulus payments. However, delinquent child support payments that have been submitted by a State may be withheld from the Stimulus payments disbursed to a taxpayer.
The IRS plans to provide the stimulus payments to individuals and families by depositing funds directly into the same banking account reflected on the latest tax return filed.
The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.
If the bill is signed by the President this week, the IRS expects to be able to release the checks before January 1, 2021.
If the taxpayer filed a 2018 return, the IRS will use that information. At this time the IRS will not require repayments of the stimulus payment.
The taxpayer will reconcile their stimulus payment on their 2020 tax return. If they are due more, the additional will be included on the tax return as a refundable credit.
The payment will go to the estate.
If you need to file your 2019 taxes, you can still have a Tax Pro file your taxes in these unprecedented times. In some areas, stores remain open and we’re following local and national health guidance to stop the spread of Covid-19. We’re also booking by appointment only and clients should confirm the appointment time with the location before arrival. Walk-ins would be available only if there is no one already waiting in the location. We also have document drop-off and upload to MyJH to limit time in an office. Clients who want to or need to stay home can use Jackson Hewitt Online Tax Pro to have a Tax Pro file their return without ever coming into an office.
If you’d like to prepare your taxes on your own, you can use Jackson Hewitt Online. Simple filers – including those who only need to file to get their stimulus payment – can use Jackson Hewitt Online to prepare and e-file their return for free.
Remember, taxpayers who didn’t get the first or second stimulus payment, or only got part of one, during 2020 may get the missing amount as a refundable recovery rebate credit when they file their 2020 tax return. The requirements for the credit on the 2020 tax return are the same as the stimulus payment requirements. You must not be a dependent of another taxpayer, you must have a valid SSN, and your AGI must be below the phase out thresholds of $150,000 for MFJ, $112,500 for HOH, and $75,000 for all others. Taxpayers with an income over the threshold may still get a portion of the credit.
Additional information on state and federal responses to the Coronavirus pandemic can be found on the IRS’ Coronavirus Tax Relief page. The IRS is processing tax returns and providing refunds to Americans in the same time frame as always. As taxpayers lose jobs and work limited hours from home during this crisis, additional funding is as critical as it has ever been. Book an appointment today and get your maximum refund as quickly as possible.
About the Author
Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 25 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.