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Stimulus check and taxes
Old 11-13-2020, 02:06 PM   #1
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Stimulus check and taxes

Howdy,


Per a Dave Ramsey article:


Stimulus Checks

As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Actís $2 trillion relief package, the government sent up to $1,200 in the form of a stimulus check to millions of Americans shortly after the pandemic shut most of the country down.10
The good news is your stimulus check will not count as taxable income. Instead, itís being treated like a refundable tax credit for 2020. Translation: Your stimulus check is sort of like an advance on money you would have received anyway as part of your tax refund in 2021.


We are trying to hit $23,000 MAGI for ACA. We typically do not get a refund or if we do It's $100. We got the $2400. I don't understand how it will effect anything...


Thanks as always,


Wally
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Old 11-13-2020, 02:16 PM   #2
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Stimulus will not effect ACA MAGI whether it is paid upfront (and not shown at all on the tax return) or taken at tax time via the refundable credit.

The reason for the second part is that the Modified AGI is calculated before any refundable credits are applied.

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Old 11-13-2020, 04:17 PM   #3
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I don't understand this. The stimulus checks don't count as taxable income, ok.

Tax credit How does that work?

I paid a chunk of change (more than our total stimulus checks) when I converted $ from tIRA to Roth. My initial spin on our 2020 tax return is that the taxes paid on the conversion were enough to meet our income tax obligation for 2020. Am I over withheld?
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Old 11-13-2020, 04:21 PM   #4
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Quote:
Originally Posted by Brat View Post
I don't understand this. The stimulus checks don't count as taxable income, ok.

Tax credit How does that work?
Itís like a spontaneous tax refund to anyone who meets the income requirements.
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Old 11-13-2020, 04:45 PM   #5
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I searched the 2020 H&R Block tax return software and find no place to enter the stimulus money we received.
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Old 11-13-2020, 04:56 PM   #6
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It sounds like the credit will show up on schedule 3 part II (refundable credits), which comes over to 1040 after AGI/MAGI is calculated. After your tax is calculated too.

Somewhere in schedule 3 or 1040 you'll be asked if you already got your check. If you did, it gets subtracted back out. So you got that check with no net impact to your taxes.

If you didn't get the check yet but qualify, you get the refundable credit in Schedule 3 part II, and it does not get subtracted out. So you it's subtracted from any tax owed, or added to your refund.

I could fire up my 2020 Turbo Tax but why do that when I get make a guess?
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Old 11-13-2020, 04:58 PM   #7
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Originally Posted by Brat View Post
I searched the 2020 H&R Block tax return software and find no place to enter the stimulus money we received.
My guess is that the IRS hasn’t finalized how this will handled in the forms yet. So it has not been added to the software yet. Up until the last few weeks, there was an outside chance of an additional stimulus to deal with. I suspect it will be functionality added in later release updates.

So don’t file yet!
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Old 11-13-2020, 05:00 PM   #8
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Quote:
Originally Posted by Brat View Post
I paid a chunk of change (more than our total stimulus checks) when I converted $ from tIRA to Roth. My initial spin on our 2020 tax return is that the taxes paid on the conversion were enough to meet our income tax obligation for 2020. Am I over withheld?
Nope, if you got the stimulus check it should have a net 0 effect on your taxes.

Quote:
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I searched the 2020 H&R Block tax return software and find no place to enter the stimulus money we received.
It may come in a later update.
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Old 11-13-2020, 05:22 PM   #9
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It shows up on the second page of form 1040. I believe that it is called the 'Recovery Rebate Credit' and listed on line 30 of form 1040.

This is only used in cases where you did not receive the proper amount of stimulus already and additional is owed to you - (ie a child was born in your family in 2020).

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Old 11-13-2020, 06:10 PM   #10
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Or you were paid less than the max based on 2019 income? But 2020 income is below the threshold.
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Old 11-13-2020, 07:26 PM   #11
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We didnít get the full 2400. Iím trying to defer distribution income from 2020 to 2021 to get the rest of the stimulus as credit ion our return. Silly I guess since we were not really impacted and donít need it as much as others might.
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Old 11-13-2020, 07:31 PM   #12
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We didnít get the full 2400. Iím trying to defer distribution income from 2020 to 2021 to get the rest of the stimulus as credit ion our return. Silly I guess since we were not really impacted and donít need it as much as others might.
But failing to claim yours does not cause it to go to others. My tack is to get it and give to my favorite charities.
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Old 11-20-2020, 04:38 PM   #13
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Originally Posted by RunningBum View Post
It sounds like the credit will show up on schedule 3 part II (refundable credits), which comes over to 1040 after AGI/MAGI is calculated. After your tax is calculated too.

Somewhere in schedule 3 or 1040 you'll be asked if you already got your check. If you did, it gets subtracted back out. So you got that check with no net impact to your taxes.

If you didn't get the check yet but qualify, you get the refundable credit in Schedule 3 part II, and it does not get subtracted out. So you it's subtracted from any tax owed, or added to your refund.

I could fire up my 2020 Turbo Tax but why do that when I get make a guess?
We made to much money in 2019 but I retired 9/2019 but didn't get 2020 Stimulus check or my 19 year old daughter who is on taxes for the deduction She is in college. Are you saying that we should get a credit when we fill out my 1040 2020 taxes?

Thanks
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Old 11-20-2020, 04:51 PM   #14
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Originally Posted by Bruno View Post
We made to much money in 2019 but I retired 9/2019 but didn't get 2020 Stimulus check or my 19 year old daughter who is on taxes for the deduction She is in college. Are you saying that we should get a credit when we fill out my 1040 2020 taxes?

Thanks
Bruno
Not RunningBum, but the answer to your question is:

1. Yes for you if your 2020 AGI is low enough for your filing status (under $150K for MFJ). There will be a place to figure out what credit you should have gotten based on your 2020 AGI, then a place to subtract the credit you got ($0 in your case), and then the extra (the full credit you are entitled to in your case) will be refunded back to you (or reduce the amount you owe, as the case may be).

2. No for your daughter if you claimed her as a dependent in 2019 and claim her as a dependent in 2020 and she's over 17. If you claimed her in 2019 but she is not your tax dependent in 2020 (perhaps she is the right age to be too old to be claimed in 2020 - 23/24 or so), then she'd do the same exercise described above, and assuming she's single and her AGI is under $75K she'd get the whole credit with her 2020 tax refund (or it would reduce the amount she owed, as the case may be).
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Old 11-20-2020, 06:55 PM   #15
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On a related question. Since I don't have my TurboTax yet, I can't check. Will the stimulus somehow get added in to AGI for qualifying ACA or IRMAA?
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Old 11-20-2020, 07:34 PM   #16
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On a related question. Since I don't have my TurboTax yet, I can't check. Will the stimulus somehow get added in to AGI for qualifying ACA or IRMAA?
That question was asked in post 1 and answered in post 2. No.
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Old 11-20-2020, 09:17 PM   #17
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That question was asked in post 1 and answered in post 2. No.
Thanks. It does answer the ACA side, sorta. Post 1 referred to the Dave Ramsey article where the stimulus check would not count as taxable income. OP asked about how the stimulus check affecting ACA. Post 2 was an reply about how it would affect ACA subsidy with no actual reference made. Without a reference, I take that as opinion which may, or may not, be factual. Neither discuss IRMAA. And since both use some version of MAGI, I would hate to be over the limit for IRMAA surcharges when maximizing my Roth conversion. I did try to find out how IRMAA's MAGI relates to AGI but got caught up in Medicare act referencing other paragraphs and such. I thought somebody had already been thru TT's software.
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Old 11-20-2020, 10:54 PM   #18
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Originally Posted by CRLLS View Post
Thanks. It does answer the ACA side, sorta. Post 1 referred to the Dave Ramsey article where the stimulus check would not count as taxable income. OP asked about how the stimulus check affecting ACA. Post 2 was an reply about how it would affect ACA subsidy with no actual reference made. Without a reference, I take that as opinion which may, or may not, be factual. Neither discuss IRMAA. And since both use some version of MAGI, I would hate to be over the limit for IRMAA surcharges when maximizing my Roth conversion. I did try to find out how IRMAA's MAGI relates to AGI but got caught up in Medicare act referencing other paragraphs and such. I thought somebody had already been thru TT's software.
The stimulus check was an advance on a refundable tax credit created by the CARES Act. As such, it is not part of AGI (nor MAGI) for any purpose, certainly not for ACA nor for IRMAA surcharge purposes.

For citation of this, I'd point you to Section 2201 of the CARES Act text, which states in parts:

"(a) IN GENERAL.—In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by subtitle A for the first taxable year beginning in 2020 an amount equal to the sum of—" (goes on to list the amounts based on filing status)

and

"(1) IN GENERAL.—Subject to paragraph (5), each individual who was an eligible individual for such individual’s first taxable year beginning in 2019 shall be treated as having made a payment against the tax imposed by chapter 1 for such taxable year in an amount equal to the advance refund amount for such taxable year."

You can read the actual text of the bill here: https://www.documentcloud.org/docume...CARES-ACT.html. The above quotes can be found around page 144 and 146-147.

So it's a credit and the government is treating it as though you made an estimated tax payment in the amount of your credit. You'll get that pseudo-estimated tax payment back either via the advanced credit payment earlier this year or with your tax return.

Since it's a refund of a tax payment (one you didn't make, but still), it is not considered income, therefore is not part of AGI, therefore not part of MAGI.
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