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2020 Could Be an Unprofitable Year for Rental Properties. Here’s How to Handle the Taxes

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Economic fallout from the COVID-19 crisis and civil unrest could cause many rental real estate properties to run up tax losses in 2020 and maybe beyond. This column covers the most important federal income tax questions and answers for rental property owners. Here goes.

What can I write off?

Nothing new here. You can deduct mortgage interest and real estate taxes on rental properties. You can also write off all standard operating expenses that go along with owning rental property: utilities, insurance, repairs and maintenance, care and maintenance of outdoor areas, and so forth.

What about depreciation write-offs?

For many rental property owners, the tax-saving bonus is the fact that you can depreciate the cost of residential buildings over 27.5 years, even while they are (you hope) increasing in value. You can generally depreciate the cost of commercial buildings over 39 years.

Example: You own a small apartment building that cost $1.5 million not including the land. The annual depreciation deduction is $54,545 ($1.5 million/27.5). The deduction can shelter that much annual positive cashflow from income taxes. So, depreciation write-offs are nice tax-savers, especially if you own an expensive property or several properties.

Variation: As stated earlier, commercial buildings must be depreciated over a much-longer 39-year period. Even so, the annual depreciation write-off for a $1.5 million commercial building is $38,462. The deduction can shelter that much annual cash flow from income taxes.

Can I claim 100% first-year bonus depreciation?

Yes, for qualified improvement property (QIP) expenditures on a nonresidential building. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) included a retroactive correction to the statutory language of the Tax Cuts and Jobs Act (TCJA). The correction allows much faster depreciation for commercial real estate qualified improvement property (QIP) that’s placed in service in 2018-2022. QIP is defined as an improvement to an interior portion of a nonresidential building that’s placed in service after the building was placed in service. However, QIP doesn’t include any expenditures attributable to: (1) enlarging the building, (2) any elevator or escalator, or (3) the internal structural framework of the building. Thanks to the CARES Act correction, you can write off the entire cost of QIP in Year 1, because it qualifies for 100% first-year bonus depreciation.

Alternatively, you can choose to depreciate QIP over 15 years using the straight-line method. That alternative might make sense if you expect higher tax rates in future years. Discuss your QIP depreciation options with your tax pro.

What else do I need to know about depreciation write-offs?

You ask such good questions. There’s more. The TCJA increased the maximum Section 179 first-year depreciation deduction for qualifying real property expenditures to $1 million, with annual inflation adjustments. The inflation-adjusted maximum for tax years beginning in 2020 is $1.04 million. The Section 179 deduction privilege potentially allows you to deduct the entire cost of qualifying real property expenditures in Year 1. I say potentially, because Section 179 deductions are subject to several limitations. Ask your tax pro for details.

The TCJA also expanded the definition of qualifying property to include expenditures for nonresidential building roofs, HVAC equipment, fire protection and alarm systems, and security systems.

Finally, the TCJA further expanded the definition of qualifying property to include depreciable tangible personal property used predominantly to furnish lodging. Examples of such property include beds, other furniture, and appliances used in the living quarters of an apartment house.

Can I claim the qualified business income (QBI) deduction base on my net rental income?

Maybe. For 2018-2025, the TCJA established a new personal deduction based on qualified business income (QBI) passed through to your personal Form 1040 from a pass-through business entity (meaning a sole proprietorship, LLC treated as a sole proprietorship for tax purposes, partnership, LLC treated as a partnership for tax purposes, or S corporation). The deduction can be up to 20% of QBI, subject to restrictions that kick in at higher income levels. For a while, it was unclear if you could claim QBI deductions based on net rental income passed through to you from one of the aforementioned pass-through entities. The IRS eventually issued taxpayer-friendly guidance that allows QBI deductions in most such cases, but you must follow complicated rules to collect the tax-saving benefit. As your tax pro for details.

What about the passive loss rules?

Ugh. If your rental property throws off tax losses (most properties do, at least during the early years and during years when the economy is suffering — like now), things can get complicated. The so-called passive activity loss (PAL) rules may come into play. Losses from rental properties will usually be classified as passive losses.

In general, the PAL rules only allow you to currently deduct passive losses to the extent you have current passive income from other sources, like positive income from other rental properties or gains from selling them. Passive losses in excess of passive income are suspended until you either have enough passive income or you sell the property that produced the losses. Bottom line: the PAL rules can postpone any tax-saving benefit from rental property losses, sometimes for years. Fortunately, there are several exceptions to the PAL rules that can allow you to deduct rental property losses sooner rather than later. Your tax pro can explain the exceptions and help you plan to become eligible, if possible.

Is that the end of the bad news?

Not exactly. Say you manage to successfully clear the hurdles imposed by the PAL rules for your rental property losses. So far, so good. But the TCJA established another hurdle that you must also clear to currently deduct those losses. For tax years beginning in 2018-2025, you cannot deduct an excess business loss in the current year. An excess business loss is one that exceeds $250,000 or $500,000 for a married joint-filing couple. Any excess business loss is carried over to the following tax year and can be deducted under the rules for net operating loss (NOL) carry-forwards. This loss disallowance rule applies after applying the PAL rules. So, if the PAL rules disallow your rental losses, this rule is a nonfactor.

COVID-19 Relief: Thankfully, the CARES Act suspends the excess business loss disallowance rule for losses that arise in tax years beginning in 2018-2020. That’s good news.

What’s the deal with net operation losses (NOLs)?

Say you manage to successfully clear both of the preceding hurdles for your rental property losses. Now we are talking, because you can generally use those losses currently to offset taxable income from other sources. If losses for the year exceed income from other sources, you may have a net operating loss (NOL) for the year.

COVID-19 Relief: The CARES Act allows a five-year carryback privilege for an NOL that arises in a tax year beginning in 2018-2020. So, you can carry an NOL from one of those years back to an earlier year, deduct it, and recover some or all of the federal income tax paid for the carryback year. Because federal income tax rates were generally higher in years before the TCJA took effect, NOLs carried back to those years can be especially beneficial. The TCJA kicked in starting with tax years beginning in 2018.

What if I have positive taxable income?

Eventually your rental property should start throwing off positive taxable income instead of losses, because escalating rents will surpass your deductible expenses. Of course, you must pay income taxes on those profits. But if you piled up suspended passive losses in earlier years, you can now use them to offset your passive profits.

Another nice thing: positive taxable income from rental real estate is not hit with the dreaded self-employment (SE) tax, which applies to most other unincorporated profit-making ventures. The SE tax rate can be up to 15.3%. Something to avoid when possible.

One bad thing: positive passive income from rental real estate owned by a higher-income individual can get socked with the 3.8% net investment income tax (NIIT), and gains from selling properties can also get hit with the NIIT. Ask your tax pro for details.

The bottom line

There you have it: most of what you need to know about the federal income tax issues that can come into play for rental property owners. The economic fallout from the COVID-19 crisis and recent civil unrest increase the odds that rental properties will suffer losses in 2020, but tax relief provisions may soften the blow.

The post 2020 Could Be an Unprofitable Year for Rental Properties. Here’s How to Handle the Taxes appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

5 Unwelcome Financial Surprises to Watch Out for in 2021

The last thing anyone wants to do right now is reflect on this year.

It was dreadful. Let’s move on.

Before you do, though, it’s a good idea to take stock of how your finances may have changed during the last 12 months and make any needed adjustments.

Here are five areas of your finances to check on so you don’t get any unpleasant surprises in 2021.

Student Loans

If you’ve been taking advantage of student loan forbearance since March — when all payments and interest on federally held student loans were suspended — it’s time to resurrect those payments.

Forbearance ends Jan. 31, 2021, at which point you start owing and accruing interest on your student loans. Don’t delay reaching out to your student loan servicer.

If you’re on the standard repayment plan and are unable to make the payments, apply for an income-driven repayment plan, which could substantially reduce your monthly payments when the forbearance period ends. If you’re already on an income-driven plan, update your income to modify your monthly payment.

Credit Cards

Don’t let the ghost of credit card purchases past haunt you in 2021.

If you want to start putting a dent in your credit card debt, we have plenty of options, including debt avalanche, debt snowball, debt snowflake and debt lasso methods.

However, if you’re having problems making payments, you should reach out to your lender to ask them about assistance or hardship programs.

Start by looking for a customer service number on a copy of your bill for your mortgage, credit card, auto loan or other loan. When you call, have your account number and a clear explanation about why you will be unable to pay the bill. Be sure to ask about all your options as well as how your payments, balance, interest rate and credit score could be affected.

Early Retirement Withdrawals

If you took a CARES Act withdrawal from your retirement account, you won’t owe the 10% penalty you’d usually owe on an early distribution before age 59 ½. Be prepared for the tax bill, though.

Normally, you’d owe income taxes on the entire withdrawal when you file your return for the year, but the CARES Act lets you spread the bill over three years. That means you need to be ready to pay one-third of the taxes by April 15, 2021.

Unemployment Taxes

If you received unemployment compensation in 2020, you may be in for a shocker. Your unemployment benefits are taxable, but more than one-third of Americans didn’t know it.

If you didn’t have taxes withheld from your jobless benefits, make sure you file a 2020 tax return even if you can’t afford the bill. You can work out a payment plan with the IRS, and you may even qualify for certain tax credits that can offset the amount you owe.

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Payroll Taxes

The IRS says employers that stopped withholding payroll taxes for the last four months of 2020, as ordered by President Trump, will have to collect those taxes during the first four months of 2021. That means if you’ve been getting a bigger paycheck as a result of the temporary tax holiday, start preparing for a smaller paycheck now.

Make a bare-bones budget, and set aside any extra money you can so you’ll be ready to live on less.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

8 Ways You Could Get Stimulus Money With Your 2020 Tax Refund

Attention, Class of 2020: If your parents or someone else claimed you as a dependent in 2019 but they don’t in 2020, you could get an ,800 credit — ,200 from the first check and 0 from the second one — provided that you file a tax return.
The IRS automatically processed coronavirus checks for people who aren’t required to file a tax return and receive Social Security, Railroad Retirement, SSDI, SSI or VA benefits.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.

8 Reasons You Could Get Stimulus Money With Your 2020 Refund

Here’s why: Both the first stimulus check and the second stimulus check are an advance on a temporary 2020 tax credit. But because of the urgency of the situation, the IRS was directed to get us that money ASAP, using information from our 2018 or 2019 returns.

1. You’re No Longer Claimed as a Dependent

If your coronavirus checks are long gone, you could have more stimulus money coming your way, even if Congress doesn’t do another thing. And if you didn’t qualify for a check based on your past tax return, you could get stimulus money if you file a tax return for 2020 that shows you’re eligible.
Generally, you can be claimed as a dependent if you’re under 19, or you’re under 24 and a student, if your parents provide at least half of your support.

2. You Had a Child in 2020

Likewise, if your payment was reduced because your income was above ,000 if you’re single or 0,000 if you’re married, you’d get the difference when you file your 2020 return.

3. Your Child Was Born in 2019, but You Took Advantage of the Tax Extension

Whoever claimed the child for 2019 probably received both the 0 and 0 payments with their stimulus check. But since the payments are technically a credit for 2020 taxes, there could be a loophole that allows the other parent to get the credit for the same child when they file next year.

4. You Get Social Security or SSI Benefits and Have a Dependent Child

The parents of any bundle of joy who arrives in 2020 will be eligible for an ,100 child coronavirus credit: 0 from the first round and 0 from the second. They’ll have to wait until they file their 2020 tax return, since the IRS doesn’t have record of these new additions yet.
Source: thepennyhoarder.com
If you have a Social Security number but you’re married and file a joint tax return with someone who doesn’t have one, neither of you initially qualified for a stimulus check under the CARES Act. But the latest relief bill changes the rules so that anyone in the household with a Social Security number will qualify for the second payment — and it also makes the change retroactive to the first round.

5. Your Income Dropped in 2020

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
That means if your tax situation changed through the course of the year, you could get stimulus money if your 2020 return shows that you’re eligible.

6. You and Your Child’s Other Parent Take Turns Claiming Them for Taxes

A lot of people will no doubt have a lot less income to report in 2020 than they did in 2018 or 2019. If you didn’t qualify for the first check because your previous income was above the ,000 threshold for singles or 8,000 for married couples, you could qualify based on your 2020 income. The second check has a lower phaseout because it’s smaller, so you won’t receive one if you’re single with an income above ,000 or married with an income above 4,000.
That means if you’re in a mixed-status household, you could get a ,200 credit for yourself, plus 0 for each dependent child 16 and younger who has a Social Security number.

7. You Increased Your Retirement Contributions in 2020

But if you reduced your 2020 taxable income to ,000 by contributing an extra ,000 to your 401(k) or traditional IRA (sorry, a Roth IRA won’t work), you’d get the additional 0 coronavirus payment from both rounds, so 0 total.
If you had a child in 2019 but got a late start on filing your 2019 return due to the coronavirus tax extension or you filed on paper, the IRS probably processed your first payment using your 2018 return. You’ll get the extra 0 child credit next year when your 2020 return is accepted. But provided that your 2019 return has been accepted, you may receive 0 for your child from the latest round with your second stimulus check.

8. You’re Married to Someone Without a Social Security Number

Suppose you’re a single filer who earned ,000 in 2019 and your income stays the same in 2020. You would have gotten a 0 coronavirus check in the first round, because payments are reduced by 5 cents for every of income over ,000 if you’re single. In the second round, you’d get 0.
But in many of these situations, the IRS only received the information needed to send the recipient the ,200. They didn’t get information about dependent children who qualified for 0 coronavirus child credits unless the recipient provided it using the non-filer tool on the IRS website within a pretty narrow timeframe.
If you got a ,200 payment for yourself but didn’t receive the extra payments for dependent children under 17, you’ll need to file a 2020 tax return to get the extra 0, even if you don’t normally need to file. The same applies if you don’t get the 0 credit with your payment in the latest round.
If one or more of these scenarios apply, you might get more coronavirus money in 2021 by submitting a tax return. And relax: You won’t owe more at tax time or get a smaller refund as the result of receiving a check.
The Washington Post’s Michelle Singletary reported on this odd quirk of stimulus payments: It appears that in situations where divorced, separated and never-married parents take turns claiming their dependent children on taxes, each parent could wind up with a 0 payment.

1099-C Cancellation of Debt—the Most Hated Tax Form

1099 c cancellation of debt

Taxes can get confusing—just looking at the names of some of the forms is enough to make your head spin. Take Form 1099-C Cancellation of Debt for example. It reports canceled debt to the IRS. And the IRS considers that canceled debt to be taxable income that has to be reported on your income tax.

What Is a 1099-C Cancellation of Debt?

Craig W. Smalley, EA, founder, and CEO of CWSEAPA, LLP, and Tax Crisis Center, LLC, describes Form 1099-C as “… a document sent by a bank when they have canceled a debt. For instance, if you have negotiated with your credit card company to pay them a lesser amount than you owe them, the difference would be reported on this form.”

What Craig leaves out is that the form applies only to the canceled debt of only $600 or more. It applies whether the debt is canceled or forgiven, which is really the same thing. The IRS defines canceled debt as “If your debt is forgiven or discharged for less than the full amount you owe, the debt is considered canceled in the amount that you don’t have to pay.”

What Craig’s comment also leaves out is that canceled debt is essentially money you’re earned because you haven’t had to repay it. So, it’s money in your pocket, hence to the IRS, it’s income—taxable income.

If you’ve had a debt canceled, expect to see a 1099-C arrive in your mail, as “the bank [or lender] is required to send this form, because it [the debt] is taxable income,” Smalley said.

And expect to ensure the income from canceled debt reported on your 1099-C is included in your tax bill or falls under a provision that either:

  • Doesn’t consider that debt income
  • Allows you to exclude that debt as income

See Form 1099-C and How to Avoid Taxes on Canceled Debt for information on exceptions and exclusions.

Bruce McClary, the vice president of communications at the National Foundation for Credit Counseling, said the 1099-C is an important reason to “be familiar with the tax consequences when considering debt settlement as an option. You don’t want to be blindsided by a costly IRS bill when you may already be struggling financially.”

Why Did I Get a 1099-C?

Four of the most common reasons that debt is canceled are:

  • You settled a debt for less than what you originally owed and the creditor picked up the remaining balance, known as debt forgiveness. This can include personal credit card debt that is canceled.
  • You didn’t pay on a debt for at least three years, and there was no collection activity on that debt for the past year.
  • Your home was foreclosed and your deficiency—the difference of what was owed and the value of the home—was either forgiven or you haven’t paid it.
  • Your home was sold in a short sale, and you made a deal with your lender to pay less than what owed.

Still not sure why you received this form? Look at Box 6 on Form 1099-C. Box 6 shows a code that explains why the lender sent it. IRS Publication 4681 breaks down the codes as follows:

  • A—Bankruptcy
  • B—Other judicial debt relief
  • C—Statute of limitations or expiration of deficiency period
  • D—Foreclosure election
  • E—Debt relief from probate or similar proceeding
  • F—By agreement
  • G—Decision or policy to discontinue collection
  • H—Other actual discharge before identifiable event

Receiving a 1099-C doesn’t necessarily mean that your debt is paid or canceled. That depends on why you received the 1099-C in the first place. If you received it because you settled your debt, then your debt is resolved. However, if you received it because you haven’t made any payments on a debt for three years and the debt collector hasn’t tried to collect in the last year, your debt is not in the clear and you may still owe the lender money.

However, the debt hasn’t been canceled, so you don’t yet need to consider it as part of your taxable income.

What to Do if You Get a 1099-C

First, don’t panic. Some debt-related items aren’t considered income and therefore won’t impact your tax bill. Other items can be excluded as income.

One of the biggest exclusions is canceled debt when you were insolvent—in other words, broke. If you can prove a debt was canceled due to insolvency, you don’t have to include that canceled debt as income or pay taxes on it. Smalley said, “… if you are insolvent [one of, meaning you have more liabilities than assets, certain cancelations would not be taxable. You have to fill out another form, and you have to make sure that you have evidence to support that you are insolvent.”

Debts discharged due to a bankruptcy aren’t reported as income either. Additionally, any student loans that are forgiven after you have worked in your field for a specific amount of time also don’t include any of the canceled debt as income.

See Form 1099-C and How to Avoid Taxes on Canceled Debt for information on these and other exceptions and exclusions, including bankruptcy and certain student loan debt.

Next, make sure you file with your 1099-C in the year you receive it. You have to file a 1099-C in the tax year you receive one. You can visit the IRS website for more details on filling out a 1099-C and getting it filed.

Finally, understand the amount on the 1099-C is the amount you’re expected to pay taxes on. However, there are those exceptions and exclusions.

There’s No Statute of Limitations on a 1099-C

As long as a debt has not been paid or canceled, there’s no statute of limitations on when a lender has to submit a 1099-C. If the lender files a 1099-C with the IRS, however, they have until January 31 to have it in your mailbox.

You can receive a Form 1099-C on an old debt at any time. The lender isn’t required to file a 1099-C if it still wants to collect or to notify you if it has intended to stop trying to collect. The lender can continue trying to collect indefinitely. That’s good for you only in that the canceled debt doesn’t then become income you have to pay taxes on.

If You Get a 1099-C on Debt You Paid

If you pay a debt and then get a 1099-C, McClary advises, “First and foremost, contact the issuer of the 1099-C and ask them to make the necessary corrections. They will need to send you a corrected 1099-C in time for you to file taxes.”

McClary also noted that if asking for a correction 1099-C doesn’t work, “the IRS has a dispute process you can use. This requires that you reach out to the IRS and let them know you wish to submit a complaint about an incorrectly issued 1099-C. They will provide you with Form 4598 that you will have to attach to your tax return, along with any additional documentation that supports your claim.”

How Does a 1099-C Affect my Credit?

The 1099-C form itself doesn’t have a direct impact on your credit score. However, whatever behavior lead to your receiving the 1099-C likely will affect your credit. For example, say you didn’t pay your debt and it was sent to collections. Having an account in collections has a negative effect on your credit. See Will a 1099-C Hurt My Credit Score? For information.

Curious about how your credit is fairing? Take a look at your free credit report summary on Credit.com and you’ll not only see two of your credit scores but also get some insights on what you’re doing well and what areas of your credit profile could use some work.

This article was originally published January 26, 2017, and has since been updated by another author.

The post 1099-C Cancellation of Debt—the Most Hated Tax Form appeared first on Credit.com.

Source: credit.com

12 FAQs About the Second Stimulus Check

Many Americans could say goodbye to 2020 with an extra $600 in their pockets, after Congress rushed to approve a relief package Monday night.

The $900 billion relief bill includes $600 stimulus checks for most adults who aren’t claimed as dependents, plus $600 for children 16 and younger. The bill will also provide a $300 supplement to unemployment benefits for 11 weeks, an additional $284 billion of Paycheck Protection Program (PPP) funds and $25 billion in emergency rental assistance. As of Wednesday afternoon, President Trump was demanding $2,000 stimulus checks and hadn’t signed the bill.

12 FAQs About the Second Stimulus Check

Here’s what we know so far about the second stimulus check. We’ll update this post as we learn more.

1. How much will I get for the second stimulus check?

Individuals making up to $75,000 per year will get $600, and couples making up to $150,000 will get $1,200. People who earn up to $112,500 and file as head of household will also receive the full $600. That’s half the amount of the first round of checks. For each child 16 or younger in the household, you’ll also get the full $600. That means a couple with two children who got $3,400 with the first round will now get $2,400.

For every $1 you earn above the limits, the payments will be reduced by 5 cents until they disappear altogether. Because checks are smaller this time, they’ll phase out at lower levels. For example:

  • An individual without dependent children won’t receive a payment if their income was above $87,000 (previously $99,000).
  • A couple without dependent children won’t receive a payment if their income was above $174,000 (previously $198,000).
  • A couple with one child younger than 16 won’t receive a payment if their income was above $186,000 (previously $208,000).

2. What year’s tax returns are the payments based on?

They’re based on 2019 tax returns, even though they’re technically an advance on a 2020 credit. (No, that doesn’t mean you’ll owe more on your 2020 return, as we’ll discuss in question 8.) If your income dropped in 2020 and made you eligible for a payment or you had a child in 2020, you’ll get your payment as a rebate in 2021 when you file your 2020 tax return.

3. Will college students who are claimed as dependents by their parents get a check?

The rules are the same as they were for the first round: If they’re 17 or older, they won’t qualify. They may be eligible for both the first and second payments (a total of $1,800) if they file their own tax returns for 2020 and they aren’t claimed as a dependent.

4. What about disabled adults who are claimed as dependents by a family member?

Again, if they’re 17 or older, they’re not eligible. They’ll also probably qualify for both payments if they file their own returns and no one claims them as a dependent for 2020.

5. I’m on Social Security. Do I get a stimulus check?

Yes, as long as your income is below the thresholds listed above and no one claims you as a dependent. The same applies to people who receive Railroad Retirement, SSI, SSDI and VA benefits. The IRS will receive your information from Social Security or whatever agency that provides your benefits, so you don’t need to take action.

6. I don’t have a Social Security number. Will I get a stimulus check?

You won’t get a stimulus check, but if you’re married to someone who has a Social Security number, they’ll still get a $600 check. This is a change from the first round of checks. Under the CARES Act, if one spouse had a Social Security number and the other didn’t, both spouses were ineligible.

7. When will I get my check?

Treasury Secretary Steven Mnuchin told CNBC on Monday that the first payments could go out early next week. People who have up-to-date direct deposit information on file with the IRS or who receive government benefits, like Social Security, through direct deposit will get their checks fastest.

8. Are the payments taxable?

No, you won’t owe taxes on stimulus payments because the checks are a special 2020 tax credit that you’re getting early — though they’ve sometimes been described incorrectly as an advance on your 2020 refund. A tax credit reduces your tax liability dollar for dollar. So if you’d normally owe nothing and you got a special $600 credit, you’d get a $600 refund. You’re simply getting that $600 credit that you wouldn’t normally get a couple months early.

9. I didn’t get the first round because I earned too much in 2019, but I lost my job in 2020. Will I qualify for this round?

Yes, as long as your 2020 income falls within the limits specified in Question 1, but you’ll have to wait until you file a 2020 tax return. You can receive both the $1,200 and the $600 payments if you’re eligible for the maximum benefit.

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10. What if I had a child in 2020?

You won’t get the $600 credit for your new addition at the same time you get your stimulus payment, but when you file your 2020 tax return, you’ll get $600 on your child’s behalf as a rebate.

11. Will I get a check if I owe back taxes?

Yes. Your check won’t be garnished or reduced if you owe federal or state taxes, or if you’re delinquent on federal student loans.

12. What about child support?

The rules for unpaid child support and stimulus checks are the same as they were for the first payments. If your tax refund is seized by the Treasury Offset program, your stimulus check probably will be as well. If someone owes you child support and you typically receive their tax refund, you’ll probably get their stimulus check as well. However, it will first go to the state agency that handles disbursement of child support payments, so don’t expect their check right away.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com