10 Sep Will we qualify for stimulus payments when we file our 2020 return?
Q. My wife and I took money out of a 401(k) in 2019 to buy a home, which put us over the $198,000 income limit for the stimulus payment. Will we receive credit when we do our taxes as our income will drop below $198,000? Also, I claimed my son this year who is 5. Will we receive that $500 credit come 2021 tax time?
— Scraping by
A. We know stimulus qualifications have been a mess for many families.
Here’s what we know based on the IRS guidance to date.
Because the payments were issued based on 2018 or 2019 tax returns for individuals, the IRS realizes that the income levels reflected on those returns may not be consistent with the taxpayer’s actual income for 2020, said Steven Gallo, certified public accountant and personal financial specialist with U.S. Financial Services in Fairfield.
“When you file your 2020 tax return sometime in 2021, there will be a reconciliation as part of the 2020 1040 form,” Gallo said. “If it is established at that time that based on your lower 2020 income you should have received a stimulus payment, you will be given the appropriate credit on your 2020 tax return.”
The same would be true for the $500 credit for your dependent son, he said.
Gallo offered this example based on your numbers.
Let’s assume that your income for 2020 is below $150,000, which would qualify you for the full $1,200 stimulus payment plus the $500 dependent payment, you will be given a $1,700 credit on your tax return, Gallo said. This would reduce any taxes owed or increase any refund due by that amount, he said.
But note that the IRS has sometimes changes its guidance, so this is only accurate as of today.
The IRS also said it will not try to recoup payments made to people who have higher income reported on their 2020 returns.
Email your questions to moc.p1600696525leHye1600696525noMJN1600696525@ksA1600696525.
This story was originally published on Sept. 10, 2020.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.