Stimulus Law FAQ

Do I have to pay tax on my stimulus payment?
No. The tax rebate is an advance payment of a special 2020 tax credit…so it is nontaxable.

I owe back taxes. Will my rebate be reduced?
No. 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 a person.

My wife and I had a baby in Feb. Will we get an extra $500 tax rebate?
Yes, assuming you otherwise qualify…but not this year. On your 2020 return, which you will file next year, you will reconcile the rebate money that you received with your actual tax situation. If you otherwise qualify for the tax rebate break, you get an extra $500 refundable credit for your newborn on your 2020 Form 1040.

I just got my rebate. What if my 2020 AGI ends up being too high to qualify?
Do I have to repay the money?
No. Rebates generally don’t need to be repaid. For more on stimulus payments, see www.kiplinger.com/letterlinks/checks. It has answers to lots of queries and includes a description of two new IRS web tools: One is for people who would qualify for a stimulus payment but didn’t file a 1040 for 2018 or 2019 because their income was under the threshold amount to file a return. The other is for people to enter bank account information to get their rebates faster through direct deposit, and for individuals to check on the status of their payment.

I took a required minimum distribution from my traditional IRA in Feb.
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, provided 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. If you took an RMD in Jan., you’re out of luck…at least for now. You can’t redeposit the funds back into the IRA and treat it as a tax-free rollover. But tax practitioners tell us they expect the Revenue Service to issue guidance on the new RMD waiver, and that those rules may provide broad rollover relief.

My small business is applying for a Paycheck Protection Program loan.
If my firm gets the loan and it is forgiven, is the canceled debt taxable?
No. The stimulus law says that loan amounts forgiven under the PPP are nontaxable.

Are unemployment benefits taxable? Yes, for federal income tax purposes.
State taxation is a mixed bag. 33 states and D.C. fully tax the income. Ind. and Wis. tax them in part. Ala., Calif., Mont., N.J., Pa. and Va. don’t tax them. Alaska, Fla., Nev., N.H., S.D., Tenn., Texas, Wash. and Wyo. have no income tax.