For those taxpayers who are expecting a physical check from the stimulus package, it’s time to start checking the mailbox.
The IRS is expected to begin mailing out stimulus checks this week – $1,200 per eligible taxpayer, or $2,400 per eligible married couple, plus additional money per dependent child. The checks will go out in batches of five million per week, until done. That’s in addition to the payouts that already were distributed via direct deposit.
The qualifications on whether one is eligible for stimulus money and for how much is based on reported income, tax filing status, and number of dependents listed on tax returns of 2018 (if 2019 is not filed yet, or 2019 if it is). The money represents an advance payment on a refundable credit based on your 2020 tax return.
“It’s more complex than it initially seems,” Handwerger says.
“With your 2020 return, you can receive these monies even if you owe no tax, provided you meet the requirements. Since this financial assistance is written in the law for the 2020 year, and would not be refunded to you until tax filing season 2021, and you need the money now – Congress has granted an advance payment now using your tax information for 2018 or 2019, as described.”
In the 2021 tax season, he says, you will compute the actual such stimulus amount you deserve and then, if you are eligible for more than you receive now, you will get the difference then.
“The good news is that if you get more now with the advance than what you are eligible for with the 2020 tax return filing, you do not return the difference,” he says.
On the other hand, if you are owed more money based on the 2020 tax year, you will receive the difference later, in 2021 sometime after you file your taxes.
Handwerger is a practicing accountant and full-time lecturer in the department of accounting and information assurance at the University of Maryland’s Robert H. Smith School of Business. He launched and leads Maryland Smith’s chapter of the Volunteer Income Tax Assistance (VITA) initiative, whose 70-plus student volunteers help complete tax returns for free for low-to-mid-income individuals and families, the elderly, students and persons with disabilities.
For more on Handwerger’s coronavirus-era tax insights, go to https://www.rhsmith.umd.edu/faculty-research/smithbraintrust/insights/tax-advice-pandemic-era