Continuing with our short series on how the pandemic and the CARES act may affect your 2020 taxes, in this blog we will be talking about the Economic Impact Payments and how they will affect you.
If your adjusted gross income on your 2018 or 2019 tax return was below the limit, you received a $1,200 payment this year. If you are married, you and your spouse received $2400 total. If you have children under the age of 17, you received another $500 payment for each child. I further discussed the qualifications in my prior blog on the stimulus payment.
Frequently Asked Questions About the Economic Impact Payments
Are the payments taxable income for 2020?
- The answer is no. However, the IRS suggests you keep the letter (Notice 1444) they sent you with your tax records.
- The payment will not reduce your refund or increase the amount you owe for taxes when you file your 2020 tax return.
- This payment also will not affect your income for determining eligibility for any federal government assistance or benefits.
What if we had a baby or adopted a child in 2020?
- You will receive an additional $500 credit on your 2020 tax return. This will be in addition to the usual child tax credit.
If my spouse died and we still received the $2,400 payment, can I keep the extra $1,200?
- You are required to return the $1,200 received for a deceased person.
- If the $1,200 payment was a paper check:
- Write “void” in the endorsement area on the back of the check.
- Mail the voided check to the IRS location for your region.
- Don’t staple, bend, or paper clip the check.
- Include an explanation for returning the check.
- If the payment was by direct deposit or you have already deposited the paper check:
- Send a personal check made out to U.S. Treasury to the IRS location for your region.
- Write 2020EIP on the check and the taxpayer ID number for the person who should not have received the check.
- Include an explanation for returning the payment.
- For more information, visit the IRS website.
- If the $1,200 payment was a paper check:
My minor child, who receives survivor social security benefits, received a $1,200 payment. What do I do?
- You are required to return the $1,200 payment. Follow the directions above.
My income increased in 2020 and makes me ineligible for the payment. Do I need to pay it back?
- No. The CARES act did not include a provision that would require a taxpayer to return the payment as long as their 2018 or 2019 information qualified them for the payment.
I received the $500 payment for my child who turned 17 in 2020. Do I need to pay back the money?
- No. Keep the Form 1444 with your 2020 tax records to show you qualified for the payment.
The economic impact payments are understandably confusing as we’ve never had to deal with anything like this before. If you have more questions about your payments or how they will affect your taxes, please reach out! I’d love to help.
Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.
