Coronavirus Aid, Relief, and Economic Security Act CARES Act.

[BOB W]

https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

[TaxGuyBill]

Yep, in a few cases it would be good to wait.


Here is the legal gibberish:

The amount of credit which would (but for this paragraph) be allowable under this section shall be reduced (but not below zero) by the aggregate refunds and credits made or allowed to the taxpayer under subsection (f).


Translation: The credit is calculated on the tax return, will be reduced by the Advance payment/stimulus, "but not below zero". So the "not below zero" means there is no payback.

[Burke]

If that is correct, there are one or two cases where delaying filing 2019 would be an advantage to my remaining clients.

[TaxGuyBill]

If on the 2020 return, they find they did not qualify when it is reconciled -- it will be added back to their tax liability

No. While it is possible to receive MORE of the refundable credit on the 2020 tax return , but there is NO 'payback' if the actual credit is less than what they received.

[Burke]

If on the 2020 return, they find they did not qualify when it is reconciled -- it will be added back to their tax liability unless their tax liability is zero -- is what I am getting from this thread. And, as I recall, in the prior stimulus bill where they sent out checks, didn't they use the primary SSN to determine the order of the payments? So low numbers would be first, and high numbers would be last. That seems to be the only way to do this; so you may be able to approximately guess when the 2019/2018 lookback might occur. I also recall there was a lot of switching primary/secondary taxpayers on joint returns to get it earlier. In fact, I think I did it myself. THEN had to switch back the following year or it messed everything up in your mind when inputting information!

[Twin Turbo Z]

I feel I have a duty to each client to see that they pay the least amount of tax as legally possible. That's what they pay me for. In this case, I believe the stimulus was passed to provide help to those who have lost income due to Covid-19. I had two returns today in which their 2019 income was considerably higher than 2018 so that 2018 would qualify for some amount of stimulus while 2019 would be zero. So by not filing the return until later, they will probably receive payment that they would not normally qualify for. I do not think this was the intent of the law but it is what they came up with so I let them know their options.

No different that the ACA rules in which I have some high net worth clients paying little for health care coverage by being able to manipulate their income. I don't think that was the intent of the Affordable Care Act, but it is the law they came up with.

But will they have to reconcile it next year ? And pay back monies if 2019 did not qualify them and you told them to hold off filing and use 2018's

[WICPA]

Why do you feel like you have a duty? Genuinely curious.

I feel I have a duty to each client to see that they pay the least amount of tax as legally possible. That's what they pay me for. In this case, I believe the stimulus was passed to provide help to those who have lost income due to Covid-19. I had two returns today in which their 2019 income was considerably higher than 2018 so that 2018 would qualify for some amount of stimulus while 2019 would be zero. So by not filing the return until later, they will probably receive payment that they would not normally qualify for. I do not think this was the intent of the law but it is what they came up with so I let them know their options.

No different that the ACA rules in which I have some high net worth clients paying little for health care coverage by being able to manipulate their income. I don't think that was the intent of the Affordable Care Act, but it is the law they came up with.

[Maude Lebowski]

but I feel duty to clients to maximize their rebate. ...

Why do you feel like you have a duty? Genuinely curious.

[WICPA]

When comparing 2018 to 2019 wondering about dependents? I see in joint custody situations it looks like each parent will benefit. The one claiming child in 2019 would get credit and other parent claiming in same child in 2020 would also receive credit. So if taxpayer had child that was sixteen in 2018 should we be holding back 2019 if not yet filed so they get the $500 or will the IRS computers be set up to take that into account? Personally I do not agree with this but I feel duty to clients to maximize their rebate. This reminds me of the ACA and the people who have the means to pay for health insurance living on savings and utilizing IRA contributions to get low premiums.

Agree with FEDUKE on the good days....

[TaxGuyBill]

HUH??
I doubt if the actions of a "preparer" will have any relevance to the amount of funds disbursed within the next few weeks..
(OK. . .perhaps when the 2020 federal income tax return is filed.)

I think he was pointing out if a preparer is about to file a client's 2019 tax return with high income (which reduces or disqualifies the stimulus credit), they should look at the 2018 AGI before filing. If 2018 would result in a higher stimulus credit, the preparer would want to advise the client to NOT file the 2019 tax return yet.

[rbynaker]

Is this actually part of the law? If 2018 AGI threshold limit amount is higher than 2019, that would reduce the payment now if 2019 is not yet filed. So do those persons get addl credit when they file 2020 and it is under the limit altogether?

Yes. The credit is calculated on the 2020 return. Determine credit, subtract advance/rebate, if above $0 you get a credit, if below $0, no payback.

This may also be a consideration when looking at MFJ vs. MFS. If one spouse has income low enough to get a credit as MFS vs. getting $0 as MFJ it may be enough to offset the higher combined income tax that often results from MFS filing. I haven't run any numbers on this, just thinking out loud.

Rick

[Burke]

If 2018 AGI gives a more favorable relief payment (2019 or 2020 AGI over limit) and

[/b]overpayments don't have to be repaid[/b]

, is it now advantageous for some to delay 2019 filing until relief payments are made?

Is this actually part of the law? If 2018 AGI threshold limit amount is higher than 2019, that would reduce the payment now if 2019 is not yet filed. So do those persons get addl credit when they file 2020 and it is under the limit altogether?

[BP.]

Seemingly this would be true.

I believe this is a valid tax strategy.

And if 2019 AGI is over limit, is it now up to preparers to check 2018 AGI, and determine which gives a better relief payment?

[dtlee]

Unlike various threads I've seen on various lists about "letting my college age kids claim themselves so they can get $1,200."

I totally agree with you, Rick. I believe I saw that the IRS will need to collect these back in cases of fraud or reckless neglect. I don't know if they will try to avoid this in the initial check delivery or have an extra step to try to identify these scammers.

[rbynaker]

If 2018 AGI gives a more favorable relief payment (2019 or 2020 AGI over limit) and overpayments don't have to be repaid, is it now advantageous for some to delay 2019 filing until relief payments are made?

I believe this is a valid tax strategy. Unlike various threads I've seen on various lists about "letting my college age kids claim themselves so they can get $1,200."

Rick