Still crossing your fingers that a second stimulus payment will show up soon?
Unfortunately for those who haven’t received money yet, the latest relief rollout will not stretch out like we saw last year when some people received stimulus money in April and others saw it in May or June.
We’ve got a very short window in January to spot much of that stimulus money now.
As a result, a second stimulus check might never arrive for some struggling families. Eventually, they will see relief but it won’t be the kind of help many expect. And they’ll have to file a 2020 tax return to see the money.
For some people, it won’t be extra cash that arrives out of the blue and can be easily spent tomorrow.
This time around, the Internal Revenue Service, by law, must issue the latest Economic Impact Payments by Jan. 15. The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 set the cutoff date for sending the latest payments.
The latest stimulus has a short window to arrive via direct deposit, paper check or a government-related debit card.
Payments started going out the last week of December and will continue through early January, according to Luis D. Garcia, an IRS spokesperson.
The IRS said Friday that more than 100 million stimulus payments have been direct deposited into bank accounts.
“For those who have not yet received direct deposits,” the IRS said Friday, “they should continue to watch their bank accounts for a deposit in coming days.”
The IRS and Treasury are working with tax preparation firms to correct a problem involving some payments sent to wrong bank accounts, and many people could end up seeing direct deposits as a result of those efforts.
On Thursday, the Treasury Department and the IRS announced that it began sending about 8 million prepaid debit cards, called the Economic Impact Payment card, to some people. The card is sponsored by the Bureau of the Fiscal Service and is issued by Treasury’s financial agent, MetaBank. The IRS said the agency does not determine who receives a prepaid debit card.
Information about these cards is available at EIPcard.com.
Also on Thursday, Michigan Attorney General Dana Nessel reminded residents and operators of nursing homes and other care facilities that Economic Impact Payments belong to the person named on the check, not to the organization providing care.
The Federal Trade Commission reported that some nursing homes and assisted living communities were taking the first round of payments from their residents last year, particularly those on Medicaid. “The residents were reportedly coerced into signing over their checks to the facility in which they were housed,” according to the AG’s office.
Some money will continue in the next week or so to head to people who need it after the COVID-19-induced recession.
But if you don’t get a debit card or a check or a direct deposit sometime soon, well, you’re on your own of sorts.
What is the Recovery Rebate Credit?
Taxpayers will need to file a 2020 federal income tax return to claim the Recovery Rebate Credit if they didn’t get the money or they received less money than they’re eligible to get, such as if a child’s stimulus wasn’t included in the payout.
The Recovery Rebate Credit will reduce how much they owe on their 2020 income tax return or boost their tax refund sometime in March or April or later.
The Recovery Rebate Credit is listed on Line 30 of the 1040 Form for the 2020 tax year.
Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting, said taxpayers will be able to calculate the credit owed based on their 2020 income and family situation.
The second payments are up to $600 for individuals who qualify and up to $1,200 for a married couple filing a joint return with no children. An extra $600 is added to the latest payout, for example, for each qualifying child ages 16 and younger.
If you received less money – or didn’t get that check or direct deposit – before you file a tax return, you’d need to turn to Line 30 on the 1040 to fix the trouble spots and help you claim what you are owed.
The good news for some is that if you already received more stimulus money than you would have qualified for based on your 2020 situation, then you don’t have to repay the difference, Luscombe said.
One caveat: Deceased people do not qualify for the the stimulus, Luscombe said. He noted that the most recent legislation, which was signed by President Donald Trump on Dec. 27, specifically states that those who died in 2019 or earlier are not covered and their payments must be returned to the federal government.
Is the stimulus money taxable?
Some people are concerned that they’ll pay income taxes on the stimulus payouts, but they won’t. The first and second round of stimulus cash will not be treated as taxable income. (Unemployment compensation is taxable.)
Another plus: Those taxpayers who received the correct amount of stimulus last year for the first round and this year for the second do not have to deal with completing the recovery credit on the 2020 tax return.
When it comes to getting paperwork ready, you’ll want to dig up the IRS Notice 1444 for the stimulus payment amount you were issued in 2020. And the second round of payments would be outlined in Notice 1444-B.
The Recovery Rebate Credit would be reduced by any Economic Impact Payment that you’ve already received. You’d use a recovery credit worksheet to figure out the credit amount.
First figure out if you’re eligible. You cannot tap into the Recovery Rebate Credit if you are claimed as a dependent on someone else’s tax return, for example.
Income limits do apply to the credit. Eligibility for the payments starts to phase out at adjusted gross incomes of $75,000 for single filers and $150,000 for joint filers.
The stimulus payment is cut by $5 for every $100 of income earned above the thresholds. For example, a couple earning more than $174,000 won’t get a second stimulus payment – that compares with the $198,000 cutoff with the first higher payments that started out at $2,400 for married couples with no children.
Single people making more than $87,000 wouldn’t get stimulus money now.
An important point to note: You’d want to file a 2020 federal income tax return even if you are not required to file a return in order to get that recovery rebate. The same is true, of course, if you qualify for things like the Earned Income Tax Credit for lower income workers or some other credits.
“If you received a partial payment, you may be able to claim more in the form of a recovery rebate credit when you file your 2020 taxes,” said Lisa Greene-Lewis, a certified public accountant and tax expert for TurboTax.
“If you received too much,” she said, “the IRS says that you don’t have to pay it back.”
It is still possible to check whether the IRS is sending the second stimulus to you now. See “Get My Payment” at IRS.gov.
Many consumers who have gone to that site, though, have found some IRS messages to be unclear. Many wonder what it means if the IRS tool says: “Payment Status #2 – Not Available.” Does that mean you don’t qualify?
The IRS said the statement means that you will not receive a second Economic Impact Payment via direct deposit or the mail. You’re going to have to use that Recovery Rebate Credit.
And, yes, that means you must wait even longer for the so-called relief money. It’s not exactly comforting news, especially for many taxpayers who told me repeatedly the past week that they received their first stimulus payment without a hitch. They don’t know what’s wrong now.
The IRS maintains: “The IRS is working hard to deliver the second Economic Impact Payment quickly, as required by law, while still preparing for the upcoming 2021 tax filing season. Due to the compressed timeline, the IRS is unable to reissue and mail checks and instead encourages people to file their 2020 tax return electronically to claim and receive the Recovery Rebate Credit quickly as possible.”
Are some people seeing that money after glitches?
The IRS noted on Friday that some recipients who used refund anticipation loans or similar products may have had their payment directed to the temporary bank account established when their 2019 tax return was filed.
“The IRS and tax industry partners are taking immediate steps to redirect stimulus payments to the correct account for those affected. The IRS anticipates many additional taxpayers will receive payments following this effort.”
The effort to fix this problem was ongoing Friday, so there continues to be much confusion for many taxpayers. And you might not always see the correct answer by using the “Get My Payment” tool at IRS.gov.
“For those taxpayers who checked Get My Payment and received a response indicating a direct deposit was to be sent to an account they do not recognize, the IRS advises them to continue to monitor their bank accounts for deposits,” the IRS said Friday.
“The IRS emphasizes that the information taxpayers see in the Get My Payment tool, including account numbers and potential deposit dates, may not display an accurate account number as we continue to work through updates.”
On the plus side, several taxpayers who had issues in early January told me later this week that they did end up receiving a direct deposit of their second stimulus payment after all.
These consumers had their taxes prepared through H&R Block and choose to have their tax preparation fees deducted from their income tax refunds. But part of that process led to some delays in the stimulus rollout.
Tax preparation firms set up temporary bank accounts so that the refunds can be sent to those accounts, the fees can be deducted and then the client receives the remaining refund cash.
Those accounts are often closed or inactive after tax season so when the IRS sent money to those accounts, the money had to be sent back to the U.S. Treasury.
Jackson Hewitt’s industry sources, for example, estimate that the IRS inadvertently sent out stimulus payments to more than 13 million bank accounts that are no long open or valid.
Millions of stimulus payments faced slowdowns because of these types of inactive accounts.
H&R Block said it would be working to get the second round of stimulus money to customers through direct deposit to their bank accounts or prepaid debit cards.
TurboTax posted online: “Unfortunately, because of an IRS error, millions of payments were sent to the wrong accounts and some may not have received their stimulus payment.
“We have been working tirelessly on a solution with the Treasury and the IRS. As a result, our expectation now is that within days the error will be corrected and stimulus payments will begin being deposited into the correct bank accounts. We have also re-confirmed with the IRS information that they have all of the correct banking for our customers,” according to the online statement.
If you still run into snags and snafus, remember the Recovery Rebate Credit.
Those who find themselves without stimulus cash – from the first or second round – must turn to the Recovery Rebate Credit on Line 30 on the 1040 as their last resort.
Unfortunately, it could mean that some facing financial challenges will have to wait until the first week of March to see their stimulus money.
Taxpayers who claim the Earned Income Tax Credit and the Additional Child Tax Credit face required delays by law even if they file as soon as the tax season starts.
The IRS noted, as of a Jan. 5 update online, that the EITC refund can be expected “as soon as the first week of March if you file your return online, you choose to get your refund by direct deposit and we found no issues with your return.
New source – https://www.usatoday.com/
