Your 2020 U.S. taxes could be affected if you did not receive your stimulus payments.
The year 2020 was like no other. For those in the luxury yachting industry, the year began with dread and thankfully for many crewmembers, the fallout for COVID was less disastrous than originally projected. While not every crewmember was unscathed, our office witnessed a better than expected rebound for yacht sales, charters, and vessel usage. As we still process the past year, it’s important to remember that tax-filing season begins immediately after the year ends. It’s important to step back and consider all tax implications for 2020.
Back in March 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), legislation intended to help Americans and businesses survive a public health and economic crisis due to COVID-19. As part of this relief package, Congress approved a $1,200 stimulus check for every adult whose adjusted gross income is $75,000 or less, $150,000 for married filing joint couples.
The reason it’s important to know whether or not the payment was received is that if you inform your accountant that you never received the stimulus check, they may take a credit on your 2020 tax return for that lost stimulus payment.
As the year progressed, I received sporadic phone calls from clients who hadn’t received their stimulus check. In some cases, clients weren’t eligible because they earned too much income the year before. In other cases, they didn’t receive the stimulus because their address hadn’t been updated with the IRS or they may not have had a Social Security number during the prior year.
While there may have been legitimate reasons why a payment wasn’t received, there were also instances when the client actually received their stimulus and failed to realize it had been direct deposited to their account or went to an old mailing address.
The reason it’s important to know whether or not the payment was received is that if you inform your accountant that you never received the stimulus check, they may take a credit on your 2020 tax return for that lost stimulus payment. If you take the credit on your 2020 tax return and then it turns out you actually received the payment, the IRS will require you to pay it back after they reconcile your account.
As you gather your tax documents, be sure you ask, “Did I receive my stimulus check?” If you’re unsure whether or not you received the payment, review your bank records for any miscellaneous deposits. In most cases (not all), the deposit would have been for a round number of $1,200 (single) or $2,400 if you were “married filing jointly.” If you have children, the payment would have increased by increments of $500 for each eligible child.
As I write this column, clients are also receiving the second round of stimulus checks — some of these checks and payments will have been received before December 31, 2020. I suspect this may also have caused some reconciliation issues for the IRS and taxpayers as these issues are not always contemplated by Congress when the legislation is passed.
Since 2020 was a very important year when it comes to taxes, be very diligent and careful when gathering your tax documents.
This column is taken from the March 2021 issue of Dockwalk.