31 Jan Welcome to Our 1st Blog: The Biz Wizards
Welcome to the new Biz Wizards business-themed blog. Let’s face it, subjects like business, taxes, payroll, and business operations aren’t sexy or exciting. So we’ve created our new blog, “The Biz Wizards”. We want to be different, and have some fun while providing great business-themed content and keeping it light with funny business-related videos. See our “About” page for our full Bio and to subscribe.
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RECOVERY REBATE CREDIT FOR CARES ACT STIMULUS / ECONOMIC IMPACT PAYMENT
Since we are in prime tax time, I wanted to dedicate our first blog to a critical Covid-19 tax topic in case you or your tax clients received a CARES stimulus/economic impact payment. Following the statute, the IRS has explained that eligibility for the 2020 and 2021 stimulus payments are based on the taxpayer’s adjusted gross income:
Generally your Recovery Rebate Credit amount will be phased-out if your adjusted gross income for 2020 exceeds $150,000 if you are married filing a joint return or filing as a qualifying widow or widower, $112,500 if you are using the head of household filing status, or $75,000 if you are using any other filing status (Single, or Married, filing separately).
If, for some reason, you, or your tax clients, did not receive stimulus payments in these amounts:
- 1st Economic Impact Payment of $1,200 ($2,400 if married filing jointly for 2020) plus $500 for each qualifying child you had in 2020; and.
- 2nd Economic Impact Payment of $600 ($1,200 if married filing jointly for 2020) plus $600 for each qualifying child you had in 2020.
or only received a partial payment, they can claim the recovery rebate credit on their 2020 federal income tax return when they file in 2021. The IRS explains the credit in this statement.
CARES ACT RECOVERY REBATE EXPLAINED
Please note that the IRS explains, (caution “IRS speak” ahead ) “The Recovery Rebate Credit is figured like the 2020 Economic Impact Payment, except that the credit eligibility and the credit amounts are based on the tax year 2020 information shown on the 2020 tax returns filed in 2021.” For example, a person filing as single in 2019 who had adjusted gross income of $73,000, but is filing as married, had a baby, and has adjusted gross income in 2020 of $110,000 will be eligible for the additional dependent credit, and can claim that recovery rebate credit on their 2020 tax return. They may also be eligible to claim an additional credit, if the spouse did not receive, or only partially received, the 1st stimulus payment.”
Yet, if the taxpayer did receive a stimulus check because their 2019 adjusted income was low enough, but 2020 adjusted gross income was high enough to entitle the taxpayer to a lower, or no, stimulus payment, the taxpayer is not required to return the difference. Guaranteed, many taxpayers are going to be confused, and I daresay some tax return preparers will be challenged when trying to explain to their clients what is happening.
Generally, you are eligible to claim the Recovery Rebate Credit if you were a U.S. citizen or U.S. resident alien in 2020, cannot be claimed as a dependent of another taxpayer for tax year 2020, and have a Social Security number valid for employment that is issued before the due date of your 2020 tax return (including extensions).
IF YOU QUALIFY, HOW TO GET YOUR CARES ACT REBATE
You must file Form 1040 or Form 1040-SR to claim the Recovery Rebate Credit even if you are normally not required to file a tax return.” (end IRS Tax Speak) See what all this means for you or your tax clients and see the recovery rebate credit worksheet on page 59 of the DRAFT of Form 1040 instructions from the IRS.
FINAL THOUGHTS
I know you are as shocked as I am that the IRS has made this seemingly straightforward topic an absolute quagmire! But, I hope we gave you some insight and direction to help you get your rebate if you qualify!
If you need a qualified tax preparer to submit your taxes, visit the National Association of Tax Preparers
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2 Comments on Welcome to Our 1st Blog: The Biz Wizards
I don't know if it's just me or if everybody else encountering problems
with your blog. It appears as if some of the text in your content are running off the
screen. Can someone else please comment and let me know if this
is happening to them too? This may be a issue with my browser because I've had this happen before.
Cheers
Hi Frank,
Thank you for commenting. I would recommend trying a different browser. Maybe that would help with the content running off the screen (or, you may have your screen zoomed in, and zooming back out would resolve the issue). I hope this helps. We always work hard to provide useful and relevant content. If you haven’t already, be sure to subscribe to our site (there should be a pop-up that appears on the screen, or you can click on the red button at the top of the page), so you will receive updates and see our new content when it is posted!
Sincerely,
Fred & Kim ~ The Biz Wizards