Stimulus checks will not reduce future tax refunds
Social media posts falsely claim federal COVID-19 stimulus payments could reduce future taxpayer refunds. The Internal Revenue Service says the payment “will not reduce your refund or increase the amount you owe when you file your 2020 tax return next year.”
The IRS started disperse the money from the 2 trillion dollars COVID-19 Economic Recovery Plan. But memes and videos on social media spread misleading messages about made-up consequences for those receiving the payments.
A common assertion in these messages is that payments from the Coronavirus Aid, Relief and Economic Security Act – which provides Lump-sum payments of $1,200 to most individuals earning less than $75,000 a year — will reduce future tax refunds or have to be repaid.
A viral video originally posted on TikTok has been removed from this site, but continues to circulate to Facebook, making the claim, “See, what they’re not telling you is that this is just an advance on your next tax return… Next year you’ll automatically owe $1,200 tax season.”
It’s not true.
The claim in the video appears to stem from a misunderstanding of the language of the law, which uses a tax credit as a means of obtaining stimulus payments for individuals.
In a month of March report exploring options to stimulate the economy as it faltered in the face of Covid-19 pandemicthe Congressional Research Service said: “One mechanism for providing cash payments relatively quickly is to create a new refundable tax credit and then advance it to households before they otherwise claim it on their income tax returns. income.”
Later that month, when the CARES Act became lawthat is exactly what he did.
The CARES Act created a new tax credit for taxes that will be owed on income earned in 2020, but it’s now available to those who qualify. Credit allows payments $1,200 to most people making less than $75,000, as we said, and a reduced amount (on a sliding scale) to people making up to $99,000. Married couples filing jointly can get $2,400 if their combined income is less than $150,000, and parents can get $500 per child.
The Treasury Department confirmed this to us in an email, and the IRS website Explain“the payment is not income and you will not owe tax on your payment. It will not reduce your refund or increase the amount you owe when you file your 2020 tax return next year.
Similarly, taxpayers receiving a stimulus payment based on a previous year’s income level would have nothing to repay if their income in 2020 exceeds the program’s income limits, according to the tax authorities.
Yet confusion persists online. In one example of the extent of the misunderstanding, a copy of a chart showing an accurate description of the law’s allowances was annotated and shared with misleading captions.
Such Publish highlighted the section of the chart that read, ‘This is an advance on a new tax credit on your 2020 taxes. So if you get your stimulus check, you won’t get this credit when filing 2020 taxes.” This part is correct – if a taxpayer collects the stimulus payment now, they will not be able to collect it again when they pay their 2020 taxes. But the tagged table was shared with this caption : “They gave you YOUR MONEY back in exchange for your money next year.” It’s not true.
The person who originally job the graphic, Fabian Saldivar of FS Tax Service Inc. – after seeing how social media users reacted – made it clear in his caption that the stimulus money is available through new credit and will not have not to be reimbursed. In a phone interview with FactCheck.org, he said, “They think it will be taken out of taxes next year, which is not true.”
Update, April 20: To answer readers’ questions, we’ve added that taxpayers who receive stimulus payments based on a previous year’s income would have nothing to repay if their 2020 income exceeds the limits of program income.
American house. HR748, Coronavirus Aid, Relief, and Economic Security Act. March 27, 2020.
Congressional Research Service. “COVID-19 and Direct Payments to Individuals: Considerations for Using Advanced Refundable Credits as an Economic Stimulus.” March 17, 2020.
Internal revenue service. “Economic Impact Payments Information Center.” Accessed April 16, 2020.
Saldivar, Fabian. Tax specialist, FS Tax Service Inc. Telephone interview. April 17, 2020.