Recovery Rebate (COVID-19)

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#1
ATSMAN  
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After reading Senate bill S3528 this is how it is shaping up. It appears based on income some people will receive less than $1200 and then we have to explain to them why :cry: :cry: :cry:

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).

(b) SPECIAL RULES
(1) IN GENERAL.—In the case of a taxpayer described in paragraph (2)
(A) the amount determined under sub section (a) shall not be less than $600 ($1,200 the case of a joint return), and the amount determined under subsection (a) (after the application of subparagraph (A)) shall be increased by the product of $500 multiplied by the number of qualifying children (within the meaning of section 24(c)) of the taxpayer.

TAXPAYER DESCRIBED.—A taxpayer is described in this paragraph if the taxpayer—
(A) has qualifying income of at least $2,500, or
(B) has (i) net income tax liability which is greater than zero, and (ii) gross income which is greater than the basic standard deduction.

(c) 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.

(d) LIMITATION BASED ON ADJUSTED GROSS INCOME.—The amount of the credit allowed by subsection (a) (determined without regard to this subsection and subsection (f)) shall be reduced (but not below zero) by 5 percent of so much of the taxpayer’s adjusted gross income as exceeds $75,000 ($150,000 in the case of a joint return).

(e) DEFINITIONS For purposes of this section
(1) QUALIFYING INCOME.—The term ‘qualifying income’ means—
(A) earned income,
(B) social security benefits (within the meaning of section 86(d)), and
(C) any compensation or pension received under chapter 11, chapter 13, or chapter 15 of title 38, United States Code.

(2) NET INCOME TAX LIABILITY The term ‘net income tax liability’ means the excess of—

(A) the sum of the taxpayer’s regular tax liability (within the meaning of section 26(b)) and the tax imposed by section 55 for the taxable year, over
(B) the credits allowed by part IV (other than section 24 and subpart C thereof) of subchapter A of chapter 1.

(3) ELIGIBLE INDIVIDUAL The term ‘eligible individual’ means any individual other than—
(A) any nonresident alien individual,
(B) any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, and
(C) an estate or trust.

(4) EARNED INCOME The term ‘earned income’ has the meaning set forth in section 32(c)(2) except that such term shall not include net earnings from self-employment which are not taken into account in computing taxable income.
(5) BASIC STANDARD DEDUCTION.—The term ‘basic standard deduction’ shall have the same meaning as when used in section 63 (as modified by subsection (c)(7) of such section).

(f) COORDINATION WITH ADVANCE REFUNDS OF CREDIT
(1) IN GENERAL The amount of credit which would (but for this paragraph) be allowable under this section shall be reduced (but not below zero) by the aggregate refunds and credits made or allowed to the taxpayer under subsection (g). Any failure to so reduce the credit shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1).
 

#2
wel  
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Tony Nitti wrote a good article about this for Forbes. He tends to do a very good job of explaining complicated tax issues.
Here's a link - https://www.forbes.com/sites/anthonynit ... d910f221b2
 

#3
ATSMAN  
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Foxnews was reporting $1000 instead of $1200 this morning. Maybe overnight it got reduced??
 

#4
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Chandler, AZ
Also will be fun next year when preparing 2020 tax returns to explain why some clients will have to pay some of this back.
 

#5
ATSMAN  
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The current bill uses 2018 tax return figures BUT those without 2018 tax figures it uses 2019. Again many people will file their 2019 tax returns 7/15/2020, so what figure do they use if both 2018 and 2019 tax return information is missing.

I guess there are more questions than answers at this time.

I just hate to get to a point where our phones are ringing off the hook from clients who did not get the full amount, asking why?
 

#6
FLAcct  
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Florida
And I've had the question - What if their 2018 income was too high for the rebate, but their 2019 income would qualify them? Anyone heard anything on this?
 

#7
dsocpa  
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Maryland
FLAcct I don't think the bill has made it out of the Senate. No one can agree!

So many questions. Of course the devil will be in the details.
 

#8
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NC
Bigger picture... we could be looking at 20-30 percent unemployment. We do NOT have a client that won't be affected.

$1,000?? $2,000?? Political posturing. Will NOT stop the inevitable.

We should be (I have been) advising our clients how best to handle this.

Little things like.. don't make your 1st and 2nd qtr ES payments until we see full effect of this.

Don't pay your 2019 liability until July.

I have encouraged many to consider removing themselves from payroll for 3 months.

Not universal, not all inclusive BUT cash may soon be like Gold.

Spoke to a partner of a large local firm here. He told me they drew their credit line to it's MAX.

Literally, they are at the brink of layoffs as they won't be able to pay their staff if collections slow....

We are all affected.
 

#9
ATSMAN  
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Cash flow is going to be the straw that broke the camel's back. The Fed Govt. needs to set up a process where business owners can get short term loans (6 month or less) for 0 interest, to meet payroll and other critical obligations to keep the business afloat. What good is it if the business fails and the employees are on unemployment for 39 weeks??
 

#10
sjrcpa  
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Maryland
MD did that today. Up to $50K at -0-% for 12 months.
 

#11
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California
Now it is $1,200 per adult and $500 per child based on tax return.

And the latest news is that the phasing out is based on income on 2019 tax return, or on 2018 tax return if the 2019 tax return has not been filed.

There is a ‘rumor’ that having filed an extension for 2019 might possibly cause confusion and delay the stimulus payment check. The reason is that if anything about 2019 has been filed, whether it is only an extension or the actual tax return, the IRS computer will not look at 2018 income tax return of the taxpayer and will instead just try to look for 2019 income information only. But since the actual 2019 tax return has not been filed, that will cause a long delay in the tax return, or these taxpayers may have to wait until they file the 2019 tax return first before they can get the stimulus payment check. Can this be possibly true?

How many of your clients have filed an 2019 tax return extension? They may get stuck if this is true.
 

#12
ATSMAN  
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How many of your clients have filed an 2019 tax return extension? They may get stuck if this is true.



So far I have 2 clients, both insisted on filing extensions before they left for Florida for the winter. The rest I was planning on filing 4/15.
 

#13
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I've filed maybe three 1040s, including my own. Working on 5 more right now, and probably have about 4 additional that will be filed before 4/15. All the others will be extended.
 

#14
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Lower 48
What is the benefit of filing an extension on or before April 15 rather than July 15?
 

#15
sjrcpa  
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One reason-it will extend gift tax return if client has one. Gift tax returns are not given the July 15 filing deadline.
Another reason- if you have a state that accepts a federal extension but has not extended state filing deadline.
And-so you don't forget to do it in July.
 


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