Someone on Twitter asked: “So the stimulus checks they are sending are technically an advance refund of 2020 taxes?!?!”
Not true (in the way people are thinking). The law creates a refundable tax credit (economic impact payment) for the 2020 tax year.
What you get now is an advance on that credit you would otherwise get as your tax refund in 2021 (for your 2020 tax filing), like Obamacare’s Advance Premium Tax Credit.
You might be getting more money back in 2021 for your 2020 tax refund. For instance, if you had a child during 2020, or during 2019 but didn’t file yet, you won’t get $500 for that child now, but you will be able to get that $500 on next year’s tax refund.
To clarify, a “refundable” tax credit is IRS lingo for free money.
For instance, the Earned Income Tax Credit is fully refundable.
The Child Tax Credit is $2,000, but only $1,400 is refundable.
The new coronavirus tax credit is $1,200 per adult and $500 per child, and is fully refundable.
The additional money on your 2020 tax refund IS the coronavirus economic impact payment. They are sending advance payments of this tax credit now.
If you make less than $75,000 per person in 2020 but more on your past tax return, you should get more money on your 2020 tax refund.
“The rebate is actually an advance on a tax credit that you may claim on your 2020 tax return. If your income is lower in 2020 than in 2019, any additional credit you are eligible for will be refunded or reduce your tax liability when you file your 2020 tax return next year.”