This year has been quite an adventure for people who need to file and pay taxes. COVID-19's impact on the economy led to the delaying of the income tax filing date as well as the passing of the CARES Act, or what's otherwise known as the COVID-19 Stimulus. If you met the eligibility requirements set forth by Congress and the Treasury Department, you received a payment from the government for the amount you qualified for.
Many people may have questions about whether receiving stimulus payments will mean a lower amount in their tax return, or a higher amount in taxes owed. But it may be especially worrisome for those who are currently receiving social security benefits because they have an additional source of income and filing procedures to deal with. Here's what you should know about how stimulus payments will affect how you file taxes.
Who Gets Stimulus Payments?
Stimulus payments are intended to go to tax payers who have either already filed, or who will file taxes for the years 2018 and 2019. Note that social security beneficiaries are also included in this group. You qualify for $1,200 if you filed individually and your annual income is $75,000 or less, and $2,400 if you filed jointly with your spouse and your combined annual income is $150,000 or less. If you have any children under age 17 who you claimed as dependents, you get an additional $500 per child. If you filed as a head of household, your income can be as high as $115,000 to get the $1,200 payments as well as the $500 per qualifying child.
You will not get a stimulus payment if you have an annual income of $99,000 or more when filing as an individual, $136,500 or more when filing as a head of household, or $198,000 when filing jointly. You also cannot get one if you're classified as a dependent, don't satisfy the requirement in the IRS's non-filer tool, or are a non-resident alien. Bear in mind though that payments are received much quicker if you met the April 15 deadline for direct deposit of your payment, because otherwise receiving it via check in the mail could take months.
How Social Security Benefits Affect Receiving Stimulus Payments
Those who have been receiving social security benefits since before January 1 of this year, and who do not regularly file federal income taxes automatically receive stimulus payments. Those who started receiving them after January 1 of this year, and who didn't file tax returns for 2018 or 2019 will need to use the non-filer tool to make sure they get their payments. If you used the non-filer tool to enter information about dependents qualifying for the $500 payments after the set deadline, you will have to wait until next year to get those payments.
Social Security Benefits Tax And The Stimulus
One thing to be clear on is that a stimulus payment is NOT considered income according to the IRS. You simply report it as a tax refund credit on next year's tax form, but your tax owed or refund amount for the year 2020 will not be affected. If you're a social security beneficiary, your stimulus payment will also not affect your provisional income amount which affects how much you owe in social security benefits taxes. Your provisional income is an amount that's calculated taking your AGI calculated without student loan interest deductions or tuition fee deductions, adding any tax-free interest your investments such as 401k's or IRAs have earned, and adding all of that to 50% of the current amount of your social security benefits.
If your provisional income is $25,000 or less and you're a single tax filers, or $32,000 or less and a joint tax filer, you owe nothing on benefits taxes. You will owe up to 50% in benefits taxes if you're a single tax payer whose provisional income is between $25,000 and $34,000, or a joint filer whose income is between $32,000 and $44,000. Any provisional income over $34,000 as a single filer or $44,000 as a joint filer will subject you to an 85% tax on your social security benefits. However, if you received a stimulus payment, it will not move your provisional income from one tax bracket to another, and as such you will not have to worry about seeing your benefits decrease.
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