22-06-2020 – NOTE – Information in this article is now outdated.
Of the many news items currently making waves, one which we are able to shed more light on is the stimulus package put in place by the US government.
Of course, there are many questions to be answered here, but we’ll give a brief rundown of the key points:
Who is eligible?
Any US citizen who holds a social security number, regardless of where they live in the world.
How much is the stimulus?
For those eligible for the full stimulus amount, you will receive a cheque for $1200 per adult, and $500 per child (under 17).
The stimulus amount is based upon your level of income in your 2019 return, or the 2018 return if not filed.
The stimulus begins to phase out at $75,000 USD of adjusted gross income, at $5 per every $100 of income over the $75,000 threshold. Your adjusted gross income can be found on line 8b of your prior year tax return (Form 1040).
|Filing Status||Phase out begins||Phase out ends|
|Married Filing Jointly||$150,000||$198,000|
|Head of Household||$112,500||$146,500|
For those above the phaseout range, you will not receive the stimulus.
How and when will it be paid?
The IRS will post a cheque to your last known address, or where possible (if your bank account details are on file), they will perform a direct deposit (US bank accounts only). They expect the first payments to be made within the next three weeks.
How does the stimulus work, and is it taxable?
The stimulus differs from similar stimulus payments provided in the past, as this is essentially a refund by the IRS in the form of a loan. The stimulus payments will need to be paid back to the IRS in your 2020 tax return, or potentially later. It is also possible that a tax cut could be introduced, which may result in no stimulus being paid back at all.
But, it is important to remember that unfortunately, this is not free money from the IRS. It does simply mean a loan that they pay to you now, and will (or may) result in the same amount being due in tax on your 2020 tax return.
This loan is interest free, and because it acts as an advance tax refund by the IRS, it is also non-taxable.
Further information is available at IRS.gov/coronavirus