How your federal income taxes could change your next stimulus check



With just days left till Nov. 3, Washington is increasingly looking to the lame-duck period after the general election as the best opportunity to pass another economic rescue package, with many of the details in a new bill still to be worked out. One key piece in a second payment already played a major role in the first: The size of a stimulus check and your taxes are tied together.

Your federal tax returns determine how much money you’re entitled to and who even qualifies for a direct payment, from dependents to adults, older adults and retirees. And for those who aren’t required to file a federal tax return, Congress made provisions for those people to receive checks, too.

If you got the first stimulus check of up to $1,200, does that count as income when you file your taxes next year? Based on current negotiations, could that change with a second payment? How do dependents figure in? And what happens if your income is different between your first check and a second one?

We can help answer your questions about how tax returns and stimulus checks go together. And here are the most important things to know about stimulus checks overall.

How do my tax returns determine the size of my stimulus check?

The IRS uses the adjusted gross income, or AGI, from your 2019 federal tax return (or your 2018 return if didn’t file one in 2019) to calculate your payment scale. Your AGI may be a different figure from your annual salary or take-home pay based on a variety of factors.

The income limits that decide exactly how much of the $1,200 per adult your household gets — and if you’re qualified to receive a check in the first place — stem directly from the AGI on your last batch of taxes, not necessarily what your income is at the time the checks go out.

Will I pay taxes on my stimulus payment?

No, a stimulus payment does not count as income and you won’t owe tax on it, the IRS has said.

What’s the relationship between dependents and taxes?

For the economic impact payment authorized under the CARES Act this spring, you could receive up to a $500 payment for each dependent under age 17 you claim on your taxes. The narrow definition excluded others who under tax law may also meet the requirements of a dependent, for both children 17 and older and adult relatives.

The competing proposals on the table from White House and Democratic negotiators continue to link dependents to additional payments, with one proposal providing $1,000 for each dependent child and two different proposals expanding the definition of “dependent” to any child or adult you claim on your return, for $500 apiece.

Who qualifies as a dependent and how much Congress will earmark for them will remain open till Washington approves the next stimulus check…Read more>>

Source:-cnet

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