The CARES Act, The Coronavirus Aid, or the Relief and Security Act signed by President Trump, initiated a $2 trillion stimulus package. The package itself is regarded as the largest emergency relief package in the history of the USA. According to the Tax Foundation, an average household would receive a payment of $1,532, which is $1200 per individual or $2400 for a married couple and $500 per qualifying child.
Especially in these chaotic times of the Covid-19 pandemic, when the economy is suffering from massive losses, this kind of an economic stimulus would be a big boost. A vast majority of US residents are eligible for a stimulus check from the federal government. However, a huge number of individuals still ask,’ will I get a stimulus check if I owe taxes’? Most of them are running towards tax preparation services to get advice on this, while others are worried about what kind of an adjusting entry should they pass off for this?
And all of these concerns are valid since there is a lot of confusion surrounding stimulus checks, but don’t worry we have decided to clear the air about them once and for all by compiling this definitive guide that will talk about all the queries related to the stimulus payment.
But first, let us talk about the stimulus check’s eligibility criteria.
Do You Get A Stimulus Check If You Owe Taxes?
The answer is yes! Even the people with low or no income who do not usually file taxes are eligible for the stimulus check. On the other hand, IRS will not use a stimulus check to compensate the amount you already owe the government, which means the only possibility for your money to be held back comes around if you haven’t paid the past-due child support.
In case the situation mentioned above occurs, the Bureau of Fiscal Service will notify you about the portion of the stimulus payment that has been used to compensate you for past-due child support. Note that this portion could be the total stimulus payment depending upon how much amount you owe.
Should We Consider Stimulus Payment As A Taxable Income?
The stimulus payment is not meant to increase the amount you owe the government. Similarly, it would not reduce your refund while you’re filing your tax returns for the year. So the answer is no. You cannot consider this stimulus payment as a taxable income.
The government would provide you the money even if you didn’t pay any tax, which means that this stimulus payment is technically a refundable tax credit.
How Much Money Would You Get?
Typically, when you file a tax return, the government provides you money from tax credits. However, with the Coronavirus pandemic’s current situation, the government doesn’t want you to wait until next year to receive the payment. To meet that purpose, the stimulus checks have been set as a tax credit. Here’s how much you will get.
- If your income is under $75,000 (Under $150,000 if married and filing jointly), you will receive a payment of $1200 as an individual ($2400 if married and filing jointly).
- If your income falls beyond $75,000 but is lower than $99,000 (This range changes if you are married and are filing jointly. The lower limit goes up to $150,000 and the upper limit goes up to $198,000) the amount you will get in your stimulus payment will be lesser than the amount received by people in the first bracket.
- An additional amount of $500 per child will be provided to those who are filing for stimulus checks.
Since no one is sure of their income for this year because of the pandemic’s trouble, Internal Revenue Service (IRS) will determine the eligible individuals and the amount of payment they will receive using the 2019 and 2018 tax returns.
However, most people are worried that once they file their tax returns for the current year, they’ll have to repay the surplus amount if it would be more than what they would have received. But you don’t have to worry as the IRS is not going to make you pay the difference.
Can The Stimulus Payment Be Used To Pay Taxes?
Once you receive the stimulus payment, it is up to whether you want to turn it around to pay your taxes or use it for your expenses.
However, looking at the current situation, it is recommended to hold on to the payment and meet your requirements. Also, the IRS has given a three-month extension to file the taxes, so it’s better to take advantage of that situation and pay the taxes in July.
How To Check On Your Stimulus Payment Status?
In the week of April 15, millions of people started to receive their stimulus payments via a direct deposit. If you haven’t received the payment yet, you can use the “Get My Payment” application to check on the payment status. Almost 15 days after the payment is sent, IRS will confirm the payment by mailing a letter to your last known address.
Do You Qualify For The Stimulus Check If You’re A Dependent?
Usually, the students under age 24 are considered dependents by the Tax authorities if at least half of their expenses are carried out by their guardians. If someone is claiming you as a dependent, then technically, you’re not eligible to claim a stimulus check.
By reading this brief guide, you can quickly tell that you can still avail of the stimulus check even if you owe the government past-due taxes. For further information on technical accounting subjects, read out definitive guides on subjects like tax deductions. If you’re someone with less technical knowledge, Overdraw can handle your tax preparation services.