Last year was a crazy year for all of us. It was a year characterized by lockdowns and stimulus checks, stay at home orders and masks, business closures, work lay-offs and furloughs… it was certainly a year for the history books. Despite all of the lifestyle changes and adaptations that we have experienced, some aspects of life simply remain consistent - and one of those things is taxes. With the new year comes yet another tax season, and with it some new tax laws, specifically in regards to your stimulus checks. So let’s briefly take a look at those tax changes for your 2020 return and what new things you should be mindful of when filing.
The most recent $600 stimulus checks that were distributed over the past week will not be included in your upcoming tax return as they arrived shortly into 2021, so instead they will be a consideration next year at this time. Therefore, we are referring to the $1,200 (or less depending on your income level) economic impact payments that came back in the spring.
For a majority of Americans, these payments were distributed via ACH (automatically deposited into the bank account noted on your most recent tax return), or sent out via check if you did not utilize direct deposit to receive a return in the past. The IRS recommends that all taxpayers who received a payment should keep record of this with their 2020 tax records. These payments are not to be included in your income on your tax return nor are they taxed, but keeping the proper documentation regarding the payment is important.
But what if you did not get your economic impact payment or you did not receive the full amount you were allowed? For example, if you had a baby at any point during 2020 (like my wife and I did), since that child was not claimed as a dependent in a previous tax year, you will not have received the $500 stimulus money for that child. Or maybe your income changed significantly from 2019 to 2020, increasing the amount of money you were eligible for, but you received the lower amount based on the income level filed in 2019. Should you be expecting it still after the new year? Yes - According to the IRS you should be including this information on your 2020 return. The IRS will give you a “recovery rebate credit” on your tax return for the amount you were eligible for but did not receive. This credit will either increase your refund or lower the taxes you owe this year. In other words, you will either get the economic impact payment with your refund after filing your taxes this year, or it will reduce the amount of taxes you have to pay in if you happen to owe this year.
If you need any assistance with your taxes this year or have any questions regarding your return please don’t hesitate to reach out to me. I love helping others navigate the confusing ground of taxes and taking care of the stress taxpayers feel during this time of year.
Just call me and I'll take care of it!
Joshua A. Chapel, CPA
CAS: Tax, Accounting & Bookkeeping
Schedule a call with me @ https://cas-accounting-scheduling.as.me/