Congress has reached a deal on a $900 billion coronavirus relief package, which was set to include a second round of stimulus checks. This could mean a pretty big pay day for the country’s students.
Payments of up to $600 per eligible adult are expected in the new pandemic recovery bill. Depending upon whether they meet the qualification criteria, some college students could potentially be looking at up to $1,800 in relief money in 2020, when you factor in both the first stimulus check of up to $1,200 and relief payments expected for many adults from the second Covid package.
Even the IRS is specifically telling eligible university students to chase down the stimulus cash they are owed.
“College students in particular should be careful not to overlook these payments if they’re supporting themselves and can’t be claimed as a dependent on someone’s tax returns,” said IRS Commissioner Chuck Rettig in a November statement. “A few minutes of research could really help students.”
Not just students
To be clear, the CARES Act does not stipulate that an individual be an enrolled college student in order to qualify for that first stimulus check. Instead, the law considers age and taxpayer status.
“Taxpayers qualify for the Economic Impact Payment (EIP), both the old one and presumably the ‘next’ one, by simply being a taxpayer,” explained Mark Steber, chief tax officer for Jackson Hewitt Tax Services.
And keep in mind, you don’t have to actually pay taxes to be considered a taxpayer. You just need to “be a qualifying taxpayer, i.e., not a dependent on someone else’s tax return,” continued Steber.
An individual must also provide more than half of his or her own support, to generally not be eligible to be claimed as a dependent on a parent’s tax return.
Some college students just happen to check all of these boxes.
Therefore, a university-age student who is not claimed on a tax return as a dependent could be eligible for a stimulus check under the CARES Act, and perhaps under the second Covid relief package, as well, even if they are not earning money.
Claiming past-due cash
If you are a college student who meets the criteria outlined above, Lisa Greene-Lewis, certified public accountant and TurboTax expert, says it isn’t too late to claim the stimulus money you were due from the first round of Covid relief checks.
“They can get the stimulus payment they are eligible for in the form of a Recovery Rebate Credit when they file their 2020 taxes, as long as their parents don’t claim them as a dependent,” said Greene-Lewis.
The payments included up to $1,200 per individual or $2,400 per married couple. The tax credit would either lower the amount of tax you need to pay, or increase the value of your tax refund.
The easiest way for a taxpayer to get a stimulus payment, or additional payment — if they are, in fact, due more — is to apply on their 2020 tax return, explained Steber.
“There will be a schedule and line on the tax return to reconcile what they have received so far, and the amount actually due to them based on their 2020 tax return,” continued Steber.
The IRS says that eligible individuals can claim the Recovery Rebate Credit on their 2020 Form 1040 or 1040-SR. These forms can also be used by people who are not normally required to file tax returns but are eligible for the credit.
For those concerned about how this might complicate the filing process this year, Greene-Lewis tells filers not to worry because automated tax preparation software will factor this in for you.
“TurboTax has guidance related to stimulus payments and other impacts of Covid-19,” explained Greene-Lewis. “It will ask up front if the filer received a stimulus payment and then calculate the recovery rebate credit based on actual 2020 income.”
Whatever your circumstances, tax experts agree that filing early will be an especially good idea this year.
The IRS had offered a separate online tool for those who don’t file a tax return to apply for the first Covid stimulus, but that tool was discontinued in November, and it is not yet known whether the online tool will be provided again for a second stimulus payment.
No gaming allowed
If a student has already been claimed on a parent’s tax return in prior years, Steber warns it could be tricky to qualify for the EIP payment when filing that 2020 tax return.
Steber says some taxpayers have tried to amend previously filed tax returns, in order to remove dependents from their filing, to allow them to apply for their own stimulus payment. It is a tactic that Steber describes as “very risky.”
Going forward, however, Greene-Lewis advises parents who usually claim their college student as a dependent to reconsider, especially if their child is working.
“Their student may be able to get a tax refund for any federal taxes withheld, claim an education credit for expenses paid, and get the Recovery Rebate Credit,” said Greene-Lewis.
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