Posted by UNIVERSAL ACCOUNTING & FINANCIAL SERVICES INC.

Important Information for Individuals on the 2020 Recovery Rebates

Important Information for Individuals on the 2020 Recovery Rebates

The recovery rebate credit meant to cushion the COVID 19 pandemic effect is the highlight of the CARES Act. Also called Economic impact payments, it was designed to provide $1,200 for every qualified, eligible taxpayer with an extra $500 for every qualifying child. According to the law, people who are "eligible individuals" are not nonresident aliens and people claiming on someone else's tax return as dependents.

While this is a tax credit given to reduce the 2020 income tax, the credit is fully refundable. This means that people with no tax liability can even get the credit; hence, credit is a real dollar. Many people must have gotten their check from the IRS. Taxpayers can know their rebate status by checking the Get My Payment link available on the Uncle Sam website.

The credit amount is a factor of your Adjusted Gross Income for 2018 and 2019 (Adjusted gross income). The credit phases out at the following ranges.


Rebate Amount        

AGI Phase-out Range

Single:                                   

$1,200                        

$75,000 - $99,000

Head of Household:             

$1,200                        

$112,500 - $136,500

Married Filing Joint:            

$2,400                        

$150,000 - $198,000

Data Source: IRS


For every available $100 value above the AGI phase-out range, the rebate amount comes down to $5. Once the AGI goes above the upper threshold specified above, the rebate is completely eliminated. Every filing status enjoys a 10,000 USD for every qualifying kid of an individual that qualifies. 

An eligible taxpayer (single), for instance, with three qualifying kids, can get a credit of $1,200 and $1,500 (3 X $500), which gives an entire total credit of $2,700. If the AGI gets to $129,000 ($99,000 [ideal phase-out stage] plus $30,000 [$10,000 extra phase-out for each of the qualifying kids), the credit will disappear completely. 

People yet to file their previous year's tax return might have a planning opportunity. Since the rebate check's mailing is a factor of the AGI, as explained above, it is a good idea to have the rebate check mailed in or sent electronically before completing the tax return. For cases like this, the rebate value will use the 2018 tax return, which could help boost the amount you get from the Economic Impact Payment, provided it is below your 2019 tax return. 

Taxpayers need to bear in mind that there will not be a penalty for using the filing of the 2019 extension because the extension takes care of both the payment of deficiency and the filing due date. It is essential for people whose 2019 AGi below their AGI for 2018 to file their 2019 tax return. 

For people who do not merit an advance payment for the credit because of excessive AGI using either tax years (2018 or 2019), there is a chance to benefit from using the credit to file the income tax return for the 2020 federal year, provided you have a lower AGI.

Even though the payment of Economic Impact hinges on the AGI for 2018 or 2019, the real tax credit will be paid for the 2020 tax year. There is an allowance for coordination of the payment of Economic Impact on everyone’s income tax for 2020. 

To receive your share of the Economic Impact payment, it is essential to submit your tax return for people with tax obligations in 2018 and 2019. 


FOR MORE INFORMATION ON HOW WE CAN HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CONTACT Universal Accounting & Financial Services, Inc. BY CLICKING THE BLUE TAB ON THIS PAGE.


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