Newly independent taxpayer in 2020

[cinmon428]

Wondering about the answer to these hypothetical client questions:

In 2019 I was a dependent and in college full time. My parents claimed me and they got $500 for me as part of the stimulus. But in 2020 I was independent and I plan to file my own taxes. Will I be able to claim my $1200 as part of the first stimulus on my 2020 taxes?  And oh, I forgot. Will my parents have to pay back the $500 they got for me for the first stimulus if I get $1200 for it on my 2020 taxes?

[qbteachmt]

This seems to be the plan: Since the stimulus payments were an advance on a tax credit, then if they don't qualify for the full amount they got, their difference will show on the tax return as part of what is Owed against whatever got paid through estimates and/or withholding, like any other credit.

Google this phrase:

stimulus check tax credit

[itonewbie]

Misread question. Deleted response.

[cinmon428]

So you believe that the taxpayer now filing independently in 2020 will get a credit of $700? ($1200 minus the $500 the parents got for the dependent taxpayer in 2019.)

[itonewbie]

The law is actually clear that taxpayers would be entitled to the difference between the advance refund  (EIP) and the Recovery Rebate on the TY2020 return but excess, if any, will not need to be repaid.  This means that the parent will compute the Recovery Rebate without the newly independent "child" on the 2020 return - if they are entitled to a larger Recovery Rebate than the EIP received, they get to claim that as a credit on the return but they do not owe the IRS any excess if the EIP was larger.

[cinmon428]

The question I asked was not concerned with the parents' 2020 return. I assume they get to keep the $500 for the child and have a net credit of zero for the first stimulus payment. My question was from a hypothetical newly independent taxpayer. This taxpayer was a dependent in 2019. Therefore, her parents received $500 for her as part of the first stimulus. Now, in 2020, she is independent. She is filing her 2020 taxes and wants to know if she will get the full $1200. Based on the law you cited, I am asking if you believe she will be able to claim a credit of $700 on HER 2020 return, since the parents have already received $500 for her based on their 2019 return. Or will she get the full $1200?

[itonewbie]

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@cinmon428 wrote:

So you believe that the taxpayer now filing independently in 2020 will get a credit of $700? ($1200 minus the $500 the parents got for the dependent taxpayer in 2019.)

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That part of the law is not as clear, if I recall, as the reference is made in relation to the "eligible individual" and "eligible individual" refers to only the taxpayer (and spouse, if MFJ).  Since "qualifying children" are not "eligible individuals", it may create an unintended consequence that the full Recovery Rebate could be allowed on this newly independent child's return.  May like to research this a little deeper. 

[qbteachmt]

"So you believe that the taxpayer now filing independently in 2020 will get a credit of $700? ($1200 minus the $500 the parents got for the dependent taxpayer in 2019.)"

Sorry, no. I now see you asked Two Parts. An individual tax payer will fill in the tax return and submit the info for that filing status, which means a $1,200 credit for that individual.

As for rebates, collections and differences, it's still a bit of a moving target.

Keep in mind some stimulus checks were reduced by tax debt.

[cinmon428]

I tend to believe you are correct, that as an unintended consequence, this family will receive a total of $1700 ($1200 for the new independent taxpayer and $500 for the same person who was a dependent last year) for the first stimulus payment. 

[qbteachmt]

Right now, most news releases tell you that they keep the $500, and the person files 2020 getting their own $1,200. But this is what the IRS shows:

"The IRS will provide information on what actions you need to take when you file your 2020 tax return when they are available."

What you need to do is Sign Up for IRS e-newsletters, to get the updates to your own inbox.

https://service.govdelivery.com/accounts/USIRS/subscriber/new

[cinmon428]

Oh, I get all those newsletters. I haven't seen any information on this yet. Just thought I'd open it up for discussion.