HOW YOUR VIRUS CHECK MIGHT BE TAXED
April 9, 2020 - Douglas Myser
How your virus check might be taxed. Many Americans may soon get checks in their hands from the government. But Uncle Sam could also claw back some of that money. Information about how much those checks will be--and whether or not individuals will owe IRS tax on them--will likely be hammered out in a deal by politicians very soon. Senate Majority Leader Mitch McConnell, R-Ky. unveiled a bill that proposes giving $1,200 to individuals, $2,400 to married couples and $500 per child. Those checks would start to purchase out for individuals who had $75,000 or more in adjusted gross income, or $150,000 for married couples who file jointly, according to their 2018 tax return. The proposal currently calls for giving that money as a credit against your taxes. There are three parts to determine what you would receive, according to McConnell's proposal. How your virus check might be taxed.
If your individual tax liability is between $600 and $1,200, you get back the amount of your tax liability. If it's below $600, you would get $600. And if it was more than $1,200, it would be capped at $1,200. Those amounts would double for married couples. Keep in mind that the proposal has not been finalized and is subject to change as lawmakers negotiate. The amounts McConnell is proposing are different from those discussed by Treasury Secretary Steve Mnuchin. Mnuchin confirmed that the Trump administration wants to send $1,000 to every American adult and $500 to each child. There are a few potential scenarios for how tax may or may not be applied to any checks you receive. The government could make it so that the cash payouts may have to be repaid on that year's tax return.
Alternatively, the government could consider the checks a gift, which would likely mean it would be considered taxable income. If given a choice between an advance on 2020 taxes or paying tax on it now, most might prefer to pay the tax now.
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