Coronavirus stimulus checks: What it means for your taxes
About 175 million Americans are expected to get a stimulus check to help them get through any money difficulties from the coronavirus pandemic or the shutdown efforts to stem the outbreak.
Since the Internal Revenue Service is the agency disbursing the checks and relying on old tax returns to determine eligibility, how you filed your taxes may affect how much aid you get from the government. In some cases, the stimulus may affect your 2020 taxes, too.
Other tax questions remain around the stimulus payment, too. Let’s tackle these one by one.
Why your 2018 or 2019 tax returns matter
The IRS is using the most recent taxes it has on file for you — either 2018 or 2019 returns — to figure out if your income meets the eligibility requirements. The agency is also using those returns to determine how many qualifying children you have to get the $500-per-child stimulus bonus.
If you filed a Form 1040-NR, Form 1040NR-EZ, Form 1040-PR, and Form 1040-SS in 2019, then you are not eligible for the stimulus payment, according to the IRS.
What if you haven’t filed taxes?
If you haven’t filed your 2018 or 2019 taxes, or are not required to do so, you haven’t been counted out of the stimulus payments. Americans who don’t usually file taxes can register to get their stimulus aid checks on the IRS website.
The IRS tool is for eligible U.S. citizens or permanent residents whose gross income in 2019 fell below $12,200 — or $24,400 for married couples — and weren’t required to file a 2019 federal tax return.
A Form 1040 will be automatically completed using the information you input and sent to the IRS. You will also have a chance to choose how you get your stimulus payment, either by direct deposit or by mailed check. You must provide banking information to get the payment via direct deposit. If you don’t, a paper check will be mailed to you.
The stimulus is actually a future tax credit
The stimulus payment is a refundable credit against your 2020 tax return that’s being paid out in advance. That means you don’t have to file your 2020 tax return first to get the tax credit in the form of a tax refund.
But getting the stimulus payment doesn’t reduce the normal tax refund you would expect to receive next year, since this is a new credit. The stimulus payment is also not taxed. Last, you don’t need to pay it back to the federal government.
How can the stimulus affect next year’s taxes?
If your income on your 2018 or 2019 tax returns was too high to qualify for the stimulus payment, you have another crack at it next year. If your income this year makes you eligible, you can take the tax credit when you file your 2020 taxes and get the credit as part of your tax refund next year.
New parents with children born this year will also be able to take the $500-per-child bonus next year when they file their 2020 tax returns. That stimulus bonus won’t be included in their stimulus payment this year, because the IRS determines child eligibility based on 2018 and 2019 taxes before the new babies were born.
Denitsa and Dhara are reporters for Yahoo Money and Cashay, a new personal finance website. Follow them on Twitter @denitsa_tsekova and @dsinghx.
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