Under the CARES Act, taxpayers were given "Recovery rebate payments" during the pandemic in order to aid or facilitate the cost of living expenses. The new tax law has imposed 2020 stimulus repayment on the upcoming Tax Returns.
The economic payments will not be taxable or cause an increase in taxpayers' income when filing the 2020 tax return, instead, they will be reflected as an advance credit. Some tax credits reduce the overall tax bill — the more credits that are claimed, the less in taxes will be owed. But other tax credits, such as the Earned Income Tax Credit, are refundable—-meaning that if you don’t owe any federal income taxes, the government sends you a check for the credit.
If the taxpayer received a partial rebate payment or no rebate payment based on their 2019 AGI, they could still receive the amount if their 2020 AGI was lower than in 2019. In addition, if the AGI amount on the taxpayer's 2020 return is higher than in 2019, the taxpayer will not be required to pay back any part of the credit.
Taxpayers who receive an Economic Impact Payment this year should keep Notice 1444, Your Economic Impact Payment, with their tax records. This notice provides information about the amount of their payment, how the payment was made, and how to report any payment that wasn't received.
For security reasons, the IRS mails this notice to each recipient's last known address within 15 days after the payment goes out. It's especially important for people to keep this notice if they think their payment amount is wrong. When they file their 2020 tax return, they can refer to Notice 1444 and claim additional credits,
if they are eligible for them.
Taxpayers should keep this notice filed with all their other important tax records. These include W-2s from employers,1099s from banks and other payers, other income documents, and virtual currency transaction records.
All taxpayers should keep a copy of their past tax returns and supporting documents for at least three years. Key information from their prior year's return may be required to file next year. Life changes like employment or marital status and financial gains or losses can affect a tax refund or the amount of taxes a person may owe.
The tax filing deadline has been postponed to Wednesday, July 15, 2020. The IRS is processing tax returns, issuing refunds, and accepting payments. Taxpayers who mailed a tax return will experience a longer wait. There is no need to mail a second tax return or call the IRS.
To learn more on how to apply this topic to your upcoming 2020 tax return, contact tax experts such as Direct Point Accountant Firm.
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