Providers's 2020 Tax Essentials
Table of Contents:
Providers is not part of the government and is not involved in the economic impact payment process.
What’s the Economic Impact Payment?
In response to the COVID-19 coronavirus, the government will be sending out one-time payments to all who are eligible. Most adults will get $1,200 ($2,400 for couples) plus an additional $500 per child (16 and under).
How do I get my payment?
- If you filed your 2018 or 2019 taxes, or if you receive SSDI, SSI, or Railroad Retirement, you don’t need to do anything. The IRS will automatically send your economic impact payment.
- If you receive SSDI, SSI, or Railroad Retirement benefits, you do need to file taxes to get your $500 per child payment. However, the deadline to get that payment this year passed on April 22nd. Be sure to file taxes in 2021 to get this payment then.
- If you earned enough income to file 2019 or 2018 taxes but haven’t yet, file your taxes immediately so the government will know where to send your payment.
- If you didn’t earn enough income to file 2019 or 2018 taxes, fill out this IRS form for non-filers immediately so the government will know where to send your payment.
What else do I need to know?
- When you file your taxes or fill out the non-filer form, you’ll be given the option to provide bank information for direct deposit or an address for a mailed check. To get your check ASAP, provide bank information. Checks will take longer to arrive.
- The economic impact payment will NOT come on your EBT card. It will arrive by check or through direct deposit.
- The IRS is not going to call you about this. If you get a phone call from someone claiming to be the IRS, or an email telling you to call the IRS, it’s a scam!
- You should NOT have to pay to use IRS Free File programs or Myfreetaxes.com if you qualify. Some free online filing programs will prompt you to pay for additional services, but you do not need these to file your simple return.
- Don’t miss out on refundable tax credits! In addition to the stimulus check, you may also qualify for the Earned Income Tax Credit and the Child Tax Credit. These credits will add more to your refund. Read below to see if you’re eligible.
Find more information about your Economic Impact Payment here.
What’s the Earned Income Tax Credit?
The Earned Income Tax Credit (EITC or EIC) is a tax credit (which means more money in your pocket) for people who have worked in the past year and earned low to moderate-income. EITC can reduce the amount of taxes that you owe and maybe even give you a refund.
If your income is below a certain amount and you are a US citizen with a valid Social Security Number (SSN), you may qualify for EITC. Check out the table and information below to see if you qualify. If you do qualify, The Center on Budget and Policy Priorities has a tool for calculating your 2019 EITC based on filing status, number of children, and household earnings.
Additionally, 28 states and the District of Columbia offer their own EITC in 2019 as a percentage of the federal credit. Find out if your state offers their own EITC.
You DO qualify for EITC if:
- You have dependents
- You do not have a qualifying child, but you and your spouse (if applicable) are between 25 and 65, not the dependents of anyone else, and you have lived in the United States for more than half of the year.
You DO NOT qualify for EITC if:
- You, your spouse and children, if applicable, DO NOT have Social Security numbers.
- You are filing as “married filing a separate return”
- You have investment income more than $3,600
- You are a qualifying child of someone else. If married, your spouse cannot be a qualifying child. Your qualifying child cannot be used by another person to claim EITC
- You are excluding any income you earned in a foreign country on your return.
Sources: IRS: How to qualify for EITC, TurboTax: Earned Income Credit, OLT Tax Corner
Key Tax Terms
Adjusted Gross Income (AGI):
First, let’s cover Gross Income. Gross Income is all the income you have received throughout the year including wages, tips, and salary. Adjusted gross income is that income minus deductions. AGI is used to determine eligibility for tax benefits.
Deductions:
Deductions are subtracted from your taxable income, which means you can set aside part of your income to be tax-free. The IRS offers two options for deductions: you can decide whether to take the standard deduction or itemize your deductions. Most people take the standard deduction, which is determined by your filing status, age, and if you are claimed as a dependent on someone else’s return.
Dependents:
Dependents are people who you support and can claim credits for on your tax return which can help you save money. Dependents are qualifying children or relatives who are US citizens and can only be claimed as dependents by you. Find the rules on dependent requirements here.
Filing Status:
Your filing status is determined by your relationship status and family. There are 5 possible filing statuses: single, married filing jointly, married filing separately, head of household or qualifying widow or widower. Filing status helps determine your standard deduction. Use this IRS tool to help you determine your filing status.
Tax Credit:
A tax credit reduces the amount of taxes you owe dollar-for-dollar. Tax credits essentially mean more money in your pocket. Some common tax credits include the Earned Income Tax Credit (for people who earned low to moderate income) and the Child Tax Credit (tax credit of $2000 for each child you claim as a dependent).
Withholding:
Withholding is the amount of money your employer takes from your paycheck every payday to send to the government. This amount is a part of your income tax payment and is determined by the W-4 form you file with your employer.
W-2:
A W-2 form is provided by your employer and includes information on wages, salary, and withholdings. You will need your W-2 form from your employer to fill in information about your income and withholdings. Employers are required to provide your W-2 by January 31st. If you still haven’t obtained your W-2, reach out to your employer. More information on W-2’s from the IRS can be found here.
1099:
The 1099 form is a series of forms used for reporting different types of income. Various types of income included on a 1099 form include independent contractor income (freelance, self-employed), various types of gig work (1099-K), Social Security benefits (SSA-1099), and unemployment income (1099-G).
1098:
A 1098 form is a series of four forms used to report possible deductions from taxable income. The forms include mortgage interest payments, charitable contributions (1098-C), student loan interest (1098-E), and tuition expenses (1098-T).
Sources: Chime’s 10 Basic Tax Terms,Turbo Tax Terms Glossary
