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Stimulus check

Technical topics regarding tax preparation.
#1
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I'm getting bombarded with clients wanting to know if the stimulus check will be deducted from 2020 tax return thus affecting their results next year? I can't seem to find that answer yet. Does anyone know yet?

Thanks
 

#2
Nilodop  
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Clients refer to their refund as their tax return. I usually call it a refund.
 

#3
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Sorry, still not understanding. If a client has their return filled out for 2020 (next year) and they would get a $1000 refund but they got a $1200 stimulus check in a couple weeks, would they then owe $200 Federal taxes or will this stimulus check have no effect on their 2020 tax return?
Thanks again.
 

#4
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they would get a $1000 refund but they got a $1200 stimulus check in a couple weeks, would they then owe $200 Federal taxes or will this stimulus check have no effect on their 2020 tax return?


The advanced payments are determined based on 2019 or 2018 income. The final amount of payments will be reconciled on the 2020 tax return. If in 2020 your income drops and you qualify for higher payment then get additonal payment on 2020 return. If qualify for less money because income rises, then no payback.
 

#5
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Okay, thanks.
One client asked if they were to get a $5000 (example) refund on their 2020 taxes based on regular income and withholdings, would they only get $2600 if they got $2400 (1200 each) in stimulus checks.
 

#6
JR1  
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I don't think we know that yet. I don't believe that this will be treated as in the past, where it was an advance on taxes and effectively repaid. But who knows?
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#7
JR1  
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Maybe not so fast. This from Motley Fool just now:
Why your coronavirus check won't get taxed
Before the final bill language was available, there was some uncertainty about several aspects of the coronavirus stimulus package and how people would receive money. The version of the bill that the Senate passed calls the financial assistance "2020 recovery rebates" and structures them as a tax credit. The coronavirus checks that people will receive will technically be an advance refund of that recovery rebate credit.

Because of that structure, the coronavirus check won't be considered taxable income. Instead, it'll simply reflect an adjustment to the amount of income tax you otherwise would've owed. At the same time, because the tax credit is refundable, it won't matter if you have tax liability or not -- you'll still be able to claim it.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#8
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Thanks for your responses!
 

#9
ShawnE  
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My understanding is.. the 1200 per person 500 per child will be based upon the 2018 or 2019 tax returns for purposes of the phase out >150,000. But it will be a below the line credit on your 2020 with an additional.. spot/line.. to put the amount you received in 2019. Thus if it was correct washing it out. single person no kids.. 1200 credit received 1200 = zero. BUT if you for some reason didn't get it (over the phase out in 2019) but were eligible based on 2020 income (you tanked) then you will get it on the 2020 return.
I have not seen verbiage to make this a Pre-fund of taxes. (like you described where they have to give back) But rather a below the line "refundable" credit like addtl child tax credit or eic.
Nor have I seen anything making it taxable income.
and I'm wording it just like that to CMA
 

#10
CrowCPA  
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Are they going to send out 1099s for this? A year from now lots of people are not going to remember how much they received.
 

#11
JR1  
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Some of us have been thru this before! Lovely.....
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#12
Riki_EA  
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In 2009/2010(I think), when the $400 stimulus checks were sent out, the IRS set up a website where you would input a SSN and it would let you know how much that person or couple received. We ended up having our admin input each client into the website and print out the result to put in the file that year.

Are they going to send out 1099s for this? A year from now lots of people are not going to remember how much they received.
 

#13
CrowCPA  
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Jeez Riki, I don't remember that. I guess I am getting too old. I certainly hope they do that this time.
 

#14
CathysTaxes  
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Riki, I remember that. They put it up after I did the return for a PITA client who told me that he didn't receive it. Then he complained when his refund check was $400 less.
Cathy
CathysTaxes
 

#15
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I have a client that files jointly with 5 children under 17 and they get about $10,000 Federal refund each of the past few years as their withholdings are enough to just about break even plus the $10,000 in child tax credits.

Their joint income is about $127,000 so they should possibly be getting $2400 + $2500 and they are wondering if all is the same on their 2020 taxes, would they only get a refund of $5100 (10000-4900) or is this a totally separate item that wouldn't affect their normal $10,000 Federal refund.

This is the part I don't know the answer to for sure and hoping someone does and they can let me know.

Thanks again!
 

#16
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If they receive an advance refund based on 2018 or 2019, it is considered a payment of tax against the applicable tax year (2018 or 2019). Therefore, it does not affect their 2020 return other than their potential 2020 credit will be reduced, but not below $0, by the amount of the advance payment.
 

#17
novacpa  
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I've got several hedge-fund managers and lobbyists - who ask "where's my stimulus refund" well gee-now there is threshold for the phase-out. Maybe your maid and couffer will qualify.
 

#18
ShawnE  
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Found this on the TaxFoundation.org: https://taxfoundation.org/cares-act-sen ... lief-plan/

"The proposed recovery rebates will use 2019 tax returns (2018 if the taxpayer has not filed in 2019) to determine the advanced rebate amount and reconcile the rebate based on 2020 income. This means that taxpayers who receive a smaller rebate than they are eligible for based on 2020 income will receive the difference after filing a 2020 tax return, but overpayments of rebates due to a higher income in 2020 will not be clawed back."
 

#19
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novacpa wrote:I've got several hedge-fund managers and lobbyists - who ask "where's my stimulus refund" well gee-now there is threshold for the phase-out. Maybe your maid and couffer will qualify.


Do hedge fund managers really care about a few thousand dollars? I thought only small guys like us would. Those seem to be chump changes to them.
 

#20
JR1  
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Riki, I remember that and it was soooo....helpful. I just quit trusting clients and used that. We still don't know FOR SURE that this is an advance on taxes.....more reading to do.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#21
JR1  
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So I'm reading a couple things that are different. One is that no one will have to repay this, it will be reported to determine whether you should have gotten more. And then, it's said that this is like the 2008 rebate....but I seem to recall that that DID reconcile on tax payments and reduced refunds....
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#22
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JR1

Maybe you are recalling a situation like Cathy mentioned in post #14.

You could have a situation in 2020 where some client (let's assume married couple) tells you that they never got the $2,400 stimulus check (but in reality they did). You fill out the 2020 return and calculate it like they should be getting the $2,400 in 2020 so instead of a $3,000 refund they get a $5,400 refund.

When the IRS processes the return, they say no no no, that couple had the $2,400 deposited into their account in April of 2020. So they reduce the refund back to $3k, That is different if the couples income shoots up to $600k in 2020 from $140k in 2019. In that case, they would be over the limit in 2020 but will not have to pay back the $2,400 they got based on 2019.

How many people last year with direct deposit of their paycheck did you ask if they saw a bump in their pay when the withholding went down. Most said they had no clue. There will be people who do not even realize they got the stimulus check direct deposited.
 


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