[Andrew]

Client has large refund. Not sure if I should recommend she hold off on filing. Of course, she'll make the ultimate decision. It will be a while before the tax software will be updated to incorporate any new changes. Who is still filing returns?

[EZTAX]

What changes are you seeing that would effect 2019? Only reason I can see to hold off is to figure out rules regarding virus advance refund.

[JR1]

Right, if AGI jumps the limit in 19, but didn't in 18, the question is whether it's worth foregoing the refund until the stimulus money comes....

[EZTAX]

But we are waiting to find out (I think) if stimulus must be paid back if based on 18 but then 19 shows it should not have been paid???????

[Trailman423]

My reading of the yet to be passed bill leads me to believe that the credit is available on 2020 tax returns [Sec. 6428(a)]. It is reduced by any advance payment [Sec. 6428(e)]. So if a taxpayer does not qualify in 2019 (or 2018), they may still qualify in 2020.

“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 sum of— ……………..”

The advance refund is based on 2019 if a return is on file and is considered a payment against the tax imposed in 2019. [Sec. 6428(f)(1)]

If a 2019 return has not been filed, the advance refund is based on 2018 if a return is on file and is considered a payment against the tax imposed in 2018. [Sec. 6428(f)(5) and (5)(A)]

Based on the above, I don’t see how any repayment of this recovery rebate would occur.

If no returns have been filed for 2019 or 2018, the Secretary may use information from 2019 forms SSA-1099 and RRB-1099 in order to determine eligibility [Sec. 6428(f)(5) and (5)(B)(i) and (ii)].

The code references above are created as per SEC. 2201 of the CARE act as passed by the Senate.

Last edited by Trailman423 on 28-Mar-2020 8:32am, edited 1 time in total.

[EZTAX]

So if someone qualifies based on 2018 but not on 2019, and has not filed, they should hold off filing? Ugh. Simple as mud.

[Trailman423]

And if you would qualify for 2019 but not qualify for 2018 you should file 2019 now if you haven't already done so. It just depends on which side of the mud puddle you are on. And if the House jumps right in the middle of said puddle, you can probably forget everything that I just posted.

[sjrcpa]

I'm thinking if you file now it probably won't help. Under normal circumstances, it takes a while for an efiled return to get into the IRS database. And these are not normal circumstances. Supposedly, checks will start to go out April 6.

[EZTAX]

I have been really trying to not think about these things until they are certain but with clients calling it is hard to keep to that.

Hang in there folks! As one of my co-workers said "I never realized I was essential- now I feel special!"

[IDCPA]

Everything I've read points to this being a 2020 tax credit advance. If your income increases in 2020 into or through the phaseout range, you will have to pay it back with your 2020 returns. So unless you have immediate cash needs and want an interest free loan, I can't see the advantage of altering the timing of your 2019 tax filing. Taxpayers will get what they will get, but the timing is all you'd be trying to control...

[IDCPA]

Thinking I might have that wrong. WSJ article seems to suggest no payback required in 2020 if your income increases in to the phase out. That seems to suggest that if you had an increase of income in 2019 (more likely at this point than a 2020 increase) you'd be better off getting the stimulus payment before filing the 2019 returns..... I sure hope that's not the case....

[IDCPA]

So, here's my real question, on the assumption that there is no payback.

Adult child, dependent in 2018, not a dependent in 2019. Is there an urgency to file their 2019 returns? Or will they receive the credit on their 2020 returns if they don't receive a stimulus payment?

[missingdonut]

So if someone qualifies based on 2018 but not on 2019, and has not filed, they should hold off filing? Ugh. Simple as mud.

At this point, I don't know (the bill hasn't even passed yet) but if it can wait a day or two, what's the downside?

[Trailman423]

So, here's my real question, on the assumption that there is no payback.

Adult child, dependent in 2018, not a dependent in 2019. Is there an urgency to file their 2019 returns? Or will they receive the credit on their 2020 returns if they don't receive a stimulus payment?

If 2019 is not in the system when IRS looks, they will receive the credit on their 2020 returns as per Sec. 6428(a). Eligibility for the credit will be based on the 2020 information. The credit is refundable.

[TaxItRight]

I do not understand why they set the rules like this to give the savvy folks a loophole to ‘game’ the system. The system would be much easier to administer and also much more fair to everyone if the stimulus payment just based on one particular year of income.

[JR1]

Lots of folks haven't filed, tho'....

[TaxItRight]

I understand. Then make it strictly base on 2018 tax return only for everyone. Easier to administer the system, easier for everyone to understand, no ambiguity, no loophole for anyone to game the system, etc.

[taxcpa]

Interesting question from a client- hold off or file 19?

They lost two child credits on the 19 return. Twin boys, turned 17.

According to what I read, they are using child credit eligibility as the criteria for the $500 per child. The IRS knows the kid's ages, but will they be able to adapt their systems to figure it out quickly enough for this (and hundreds of thousands more) particular circumstance?

Don't know, but my advice to the client was to hold until the 7-15 due date in any case as they have a balance due. It will be interesting to see what happens. No 19, look at 18 see the child credits and send $1,000?

Wait and see.

[EZTAX]

taxcpa - another interesting wrinkle! Having to double check each return's prior year AGI before I e-file is just one more obstacle to getting returns out the door this year. Already have several on hold pattern to get higher stimulus.

[Trailman423]

……. will they be able to adapt their systems to figure it out quickly enough for this (and hundreds of thousands more) particular circumstance? ……………… No 19, look at 18 see the child credits and send $1,000?

Even if they figure it out, can they do anything about it? The bold emphasis is mine.

6428(f) ADVANCE REFUNDS AND CREDITS.—
(1) IN GENERAL.—Subject to paragraph (5), each individual who was an eligible individual for such individual’s first taxable year beginning in 2019 shall be treated as having made a payment against the tax imposed by chapter 1 for such taxable year in an amount equal to the advance refund amount for such taxable year.
(2) ADVANCE REFUND AMOUNT.—For purposes of paragraph (1), the advance refund amount is the amount that would have been allowed as a credit under this section for such taxable year if this section (other than subsection (e) and this subsection) had applied to such taxable year.

Paragraph (5) replaces “2019” in paragraph (1) with “2018”.

So the way I read this, the children were under age 17 in the tax year for which this advance refund is calculated.

It will be interesting how IRS will apply the following to any of these “loopholes” that everyone is coming up with:

6428(h) REGULATIONS.—The Secretary shall prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including any such measures as are deemed appropriate to avoid allowing multiple credits or rebates to a taxpayer.