According to the IRS and the Treasury Department, nearly 130 million Economic Impact Payments to Americans in less than a month, and more are on the way. However, if you have received a payment amount different than what you expected, amounts do vary based on income, filing status, and family size.
Some of the scenarios noted below could be the reason for the difference in payment.
1) You have not filed a 2019 tax return, or the IRS has not finished processing your 2019 return.
If a taxpayer has already filed for 2019, the agency will still use the 2018 return if the IRS has not finished processing the 2019 return. If the IRS used the 2018 return, various life changes in 2019 would not be reflected in the payment. These may include higher or lower income or the birth or adoption of a child.
In many cases, however, these taxpayers may be able to claim an additional amount on the 2020 tax return they file next year. This could include up to an additional $500 for each qualifying child not reflected in their Economic Impact Payment.
2) Claimed dependents are not eligible for an additional $500 payment
Only children eligible for the Child Tax Credit qualify for the additional payment of up to $500 per child. To claim the Child Tax Credit, the taxpayer generally must be related to the child, live with them more than half the year, and provide at least half of their support.
The child must also be under the age of 17 at the end of the year for the tax return on which the IRS bases the payment determination and must have a valid Social Security Number.
3) Dependents are college students
Pursuant to the CARES Act, dependent college students do not qualify for an EIP, and even though their parents may claim them as dependents, they normally do not qualify for the additional $500 payment.
However, if the student cannot be claimed as a dependent by their mother or anyone else for 2020, that student may be eligible to claim a $1,200 credit on their 2020 tax return next year.
4) Claimed dependents are parents or relatives, age 17 or older
If a dependent is 17 or older, they do not qualify for the additional $500. If a taxpayer claimed a parent or any other relative age 17 or older on their tax return, that dependent will not receive a $1,200 payment.
However, if the parent or other relative cannot be claimed as a dependent on the taxpayer's or anyone else's return for 2020, the parent or relative may be eligible to individually claim a $1,200 credit on their 2020 tax return filed next year.
5) Past-due child support was deducted from the payment
The Economic Impact Payment is offset only by past-due child support. The Bureau of the Fiscal Service will send the taxpayer a notice if an offset occurs. Only the payment of the spouse who owes past-due child support should be offset.
6) Garnishments by creditors reduced the payment amount
Federal tax refunds, including the Economic Impact Payment, are not protected from garnishment by creditors by federal law once the proceeds are deposited into a taxpayer's bank account.
7) What if the amount of my Economic Impact Payment is incorrect?
Everyone should review the eligibility requirements for their family to make sure they meet the criteria. In many instances, eligible taxpayers who received a smaller-than-expected Economic Impact Payment (EIP) may qualify to receive an additional amount early next year when they file their 2020 federal income tax return. EIPs are technically an advance payment of a new temporary tax credit that eligible taxpayers can claim on their 2020 return. Everyone should keep for their records the letter they receive by mail within a few weeks after their payment is issued.
When taxpayers file their return next year, they can claim additional credits on their 2020 tax return if they are eligible for them. The EIP will not reduce a taxpayer's refund or increase the amount they owe when they file a tax return early next year. It is also not taxable, and it should not be included in income on a 2020 return.
Let Savoy Bookkeeping and Tax Services LLC, help you file your 2019 returns and get ahead of 2021 filing with all the new rules and reconciling from the stimulus payments and loans. www.savoybookkeepingandtax.com