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A lot of Americans probably don’t even know that they have stimulus funds coming their way in the future.
For a lot of people, the CARES Act was a lifesaver.
It offered $1,200 in direct payments to individuals who earned less than $75,000 and up to $2,400 for those who earn below $150,000.
But there were a lot of people who did not qualify because their income was too high.
And within that group, there are a lot of people who have seen their income decrease in 2020, largely due to the economic impact of the coronavirus.
So there are lots of people who were not eligible for checks based on their prior 2018 or 2019 income but who are currently in a situation where they could use some financial relief.
Well, a lot of these people should be helped out next year when it comes to filing taxes.
This is because the stimulus payments that went out earlier this spring and that are continuing to go out are actually 2020 tax credits.
To be specific, “They’re actually an advance on a new credit on your 2020 federal income taxes,” according to Christina Taylor, head of tax operations at Credit Karma Tax.
“If you didn’t qualify for the stimulus payment based on the prior year’s income, but you do qualify for it based on your 2020 income, you can claim the stimulus payment as a credit on your 2020 tax return,” Taylor noted.
So while it may take longer to receive the benefit from the CARES stimulus package, you should be able to take advantage of some relief you may have thought you were not entitled to if your income decreased in 2020.
This also means families with children born or adopted in 2020 will get a tax credit of $500 when they file their taxes next year.
On the flipside, if your income increased this year you don’t have anything to worry about.
The IRS will not require you to repay any payments you received from the stimulus funds.
According to the IRS, “You won’t be required to repay any payment when filing your 2020 tax return even if your qualifying child turns 17 in 2020 or your adjusted gross income increases in 2020 above the thresholds listed above.”
All of this will get even more interesting when it comes to the second potential round of stimulus checks.
Because if those checks are also based on the same income reported to the IRS, this means that you could potentially receive double the credit when you file your taxes in 2020.
So I think some people will be quite surprised to see thousands of dollars in tax credits being issued come tax time in 2021.
If your income in 2020 drops compared to 2019, be sure to follow up on this to see if you are entitled to additional credits.
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Daniel Gillaspia is the Founder of UponArriving.com and creator of the credit card app, WalletFlo. He is a former attorney turned full-time credit card rewards/travel expert and has earned and redeemed millions of miles to travel the globe. Since 2014, his content has been featured in major publications such as National Geographic, Smithsonian Magazine, Forbes, CNBC, US News, and Business Insider. Find his full bio here.