Are coronavirus stimulus checks a loan?
BIRMINGHAM, Ala. (WBRC) – The IRS has started filing federal stimulus checks of up to $ 1,200 for individuals and $ 2,400 for married couples with an additional $ 500 for each child 16 and under, in taxpayer bank accounts on April 9.
The checks were meant to provide some financial relief, but they also caused a bit of confusion.
Below, we answer some of our viewers’ questions about the 2020 Cares Act Stimulus Checks.
· Is the Stimulus Check a loan?
According to the CARES law, no. Stimulus checks are an unconditional payment meant to help your family during an economic downturn.
· If it’s not a loan, what is it?
The payments are “refundable tax credits” for next year’s taxes.
Think of it as a gift card for a restaurant; when you apply it to the invoice, it cuts down on what you owe.
As for taxes, you don’t owe money when you file for tax next spring. According to TaxFoundation.org, because the money is a refundable credit, it is your cash. No ropes.
· Is the stimulus check a down payment on next year’s tax refund? Will I get less back on my refund?
No. The one-time stimulus payment is an advance on a refundable tax credit meant to offset your 2020 federal income taxes, but instead of waiting until 2021 to get the money, you get it now.
The stimulus check will not reduce the amount you get back in repayment next year. In fact, it could increase the amount you get back.
Tax credits don’t decrease the amount of the refund you get, because a refund is simply the amount you overpaid in taxes the previous year.
A tax credit reduces the amount you owe in taxes.
By the time you file taxes, you would have already paid the collector, and because a tax credit reduces your tax bill, you may have overpaid more than you should, so you get that money back. .
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