How COVID’s Stimulus Check Will Impact Your Taxes – Presented By TheStreet + TurboTax

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How COVID’s Stimulus Check Will Impact Your Taxes – Presented By TheStreet + TurboTax How will your 2020 Covid stimulus check impact your taxes? TurboTax tax expert Lisa Greene-Lewis and TheStreet talk about Covid stimulus checks and how they may impact your taxable income and tax return in this informative tax tip video.

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~~~Video Transcript~~~
– [TheStreet] Are those stimulus checks taxable?

– That is one of the biggest questions we’re hearing right now. And one thing that taxpayers need to know is that stimulus check is not taxable. Also, another thing that they need to know is if they receive two little stimulus check lower than they’re eligible for based on their 2020 income they will receive more in the form of a tax recovery rebate. And if they received too much they won’t have to pay it back.

– ‘Cause that of course, is a big question too. So just to remind people, the stimulus check was based on your 2020 income, and many people hadn’t filed well, clearly you haven’t filed yet. You don’t have to file ’til April of 2021. So the government basically was guessing based on previous tax returns, right? So you could have had a big swing in income one way or the other?

– [TurboTax] Exactly, so they distributed those checks based on the 2018 and 2019 tax returns like you said. When you go and file your 2020 taxes in beginning of 2021, you will have your actual income for 2020, and that’s where it will be reconciled and see if you’re eligible for more stimulus, or if you didn’t receive a stimulus check and you’re eligible you may get one then.

– So people might get a little surprise in 2021. That’s kinda cool. I know there was a big question, about college kids and you and I were talking about this. If my college kids had jobs, I guess, W2 income, right? Or some sort of self-employed income even, can they qualify for a stimulus check as well?

– Yeah, that’s another question we’re hearing right now. And there were a lot of college students that did work, as long as they are not claimed as a dependent and they filed their taxes. They may be eligible for a stimulus check.

– So does that mean then you could go back and amend to take the child off the parent’s return if say in 2019, the child was a dependent. You’re saying the child has to be independent so to speak.

– Right, so it goes by your 2020 taxes. So if they are not claimed as a dependent in 2020 then they can go ahead and file their own tax return. And they may be able to get the stimulus payment, but it’ll be in the form of a tax recovery rebate.

– Right, ’cause people are starting to think through this now, should I claim my kids? Should I not claim my kid? That’s actually a good turning point as far as deciding what to do on that.

– Right, I mean, this is the time of year that people start trying to figure that out. Let’s say you have a college student and your income… The parents’ income is where they’re not being eligible for some of the education tax credits, for instance. And then their college student did work. It’s a win there because the college student may be able to get some of their education credits back. And they also may be able to get the $1,200 stimulus in the form of a recovery rebate. And I know a lot of college students are struggling right now and they need that money. So it’s really good to start thinking about that right now.

– For sure it is. And that’s funny, I got a call from my son asking if he could potentially do this. So we might be filing him a tax return for 2020 for the first time. If there’s another… There may or may not be another stimulus check issued by the end of the year if Congress passes another bill. Again, people do not have to worry about that. About, as you said earlier, being overpaid.

– As far as I know with the first stimulus payment if you receive too much, you don’t have to pay it back.

– What if there is another stimulus check issued to families before year end? Do they have to worry about that?

– Well, we don’t know what’s gonna happen with a second stimulus check, but if there is another stimulus check that is passed, our Coronavirus Relief Center, as well as the Self-Employed Coronavirus Relief Center on our TurboTax blog will be up to date with the latest information. Lisa Greene-Lewis, thank you so much for this. This is a super important for a lot of people, tons of people, gratefully got these checks and they’re gonna wonder what to do with them in April. So this is valuable advice.