TEMPLE, Texas — The recently passed economic stimulus package is set to send checks out to millions of Americans. But what will that money mean for your taxes moving forward?
The bill, totalling $2.2 trillion, is scheduled to send $1,200 tax-free credits to most Americans.
"The CARES Act, Coronavirus Aid Relief and Economic Security Act, has wide-ranging implications for almost every American," Attorney Jeff Thigpen said.
Thigpen is an attorney at Linzy & Thigpen Law Firm in Temple, which specializes in estate, tax and business law. He said the credit won't be taxed but will be a required part of your reporting when submitting your 2020 taxes next year.
"From what I've seen, it's not going to be treated as income in your 2020 return because this is a refundable credit," Thigpen said. "But it is still going to have to be reported on your 2020 return, from the information that I've read."
Because it's a "refundable credit," Thigpen said you can get that money back, even if you don't owe tax, like an earned income credit and if you've already submitted your 2019 tax returns.
But, not everybody will receive a check.
Anybody who can be claimed as a dependent, non-resident aliens and estates and trusts are ineligible and won't receive the credit. Almost everybody else should.
But, how much of the $1,200 is credited depends on where each tax-payer falls in relation to the thresholds Congress established in the passage of the bill. This is explained in the video below.
Thigpen said another part of the stimulus bill was waiving the 10% tax on early disbursements from qualifying retirement plans for coronavirus-related reasons.
"A retirement plan or IRA owner, once they turn 72, is required to take required minimum distributions, or RMD's," Thigpen said. "Those are waived for the 2020 tax year."
As far as delivery, Thigpen said the Treasury Department is hoping to send the money out within 30 days. The IRS will follow up through the mail within 15 days afterward with a confirming receipt.
If your most recent tax return was completed through direct deposit, this credit should be too. Anyone who's filed tax returns for either the 2018 or 2019 tax years or receives either social security or railroad retirement, Thigpen said the IRS already has your mailing and banking info.
For anyone not required to file taxes who don't fall into those categories, Thigpen recommended filing for either the 2019 or 2020 tax years. The full explanation is in the video below.
To contact Thigpen or the Linzy & Thigpen Law Firm, call 254-773-1663 or click here.
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