Stimulus and other information

Answered questions regarding the economic stimulus payments and other important information.

Do I have to pay tax on my stimulus payment?

No. The stimulus is an advance payment of a special 2020 tax credit. So, it is nontaxable.

I owe back taxes. Will my rebate be reduced?

No. The IRS will not apply the stimulus payment to offset past-due taxes or other federal or state debt, except for delinquent child support owed by an individual.

My wife and I had a baby in 2020. Will we get an extra $500 tax rebate?

Yes, assuming you otherwise qualify, but not this year. On your 2020 tax return, which you will file next year, you will reconcile the rebate money that you received with your actual tax situation for the year. If you otherwise qualify, you will get an extra $500 refundable credit on your 2020 tax return.

I took a required minimum distribution from my traditional IRA in February. Now that Congress has waived RMDs for 2020, can I put it back into the IRA?

Yes, and it will be treated as a tax-free rollover as along as you return the funds to the IRA by July 15 and you don’t violate the one-rollover-every-12-months rule. Normally, you have 60 days to do a tax-free rollover, but IRS extended the time period for rollovers otherwise due between April 1 and May 15 of this year to July 15.

Businesses should take note of this easing in the federal stimulus law: Employers may defer payment of their 6.2% share of Social Security tax, otherwise required to be made from March 27 through the end of the year. Half of the deferred amount is due December 31, 2021 and the other half I due December 31, 2022. Self-employed individuals can defer payment of up to 50% of their SECA tax.

An important fact to note regarding this is that special rules apply to employers that receive paycheck protection program loans. Employers who get a PPP loan may defer deposit and payment of their share of Social Security tax, without penalty, through the date that the lender issues a decision to forgive the loan. Once the employer receives that decision, the employer is no longer eligible for the payroll tax deferral. The amount that was previously deferred will continue to be deferred through the end of 2021 and 2022.

The processing of paper returns I suspended until offices reopen amid the Covid-19 pandemic.