The US Government has established many beneficial initiatives to uplift the American Citizens suffering as a result of the COVID-19 Pandemic. Most schemes fall under the purview of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted this year. One such essential program is that of the Economic Impact Payments. Under the program, the United States Government made relief payments to millions of US Taxpayers. The $2.2 trillion economic relief package covers these Economic Impact Payments. IRS issues a Payment Notice 1444 to any American Tax Payer who has received the impact payment.
What is the Economic Impact Payment?
The Economic Impact Payment is also called the Stimulus Payment. IRS has made provision for an automatic transfer of these payments to the account of a given person. Hence, one does not need to file any specific applications to receive the Economic Impact Payment.
In fact, the payment is an advance payment of a refundable tax credit, which relies on the 2020 income tax return. A person receives the Economic Impact payments based on the income status assessed in returns filed for the years 2018 and 2019. It is also available to most retired personnel and senior citizens in the country. After the payment transfer, the IRS also issues a Payment Notice 1444. A full Economic Payment is equivalent to $1200 for an individual and $2400 for a married couple. For every qualifying child in a family, the payment is $500.
Who can avail of the Economic Impact Payment?
The Economic Impact Payment is available to return filers and persons with earnings less than the specified limits. The IRS shall auto-transfer the payment amount to the eligible persons.
The following persons will receive a Full Payment:
The following persons will receive a Partial Payment.
Availability of Economic Impact Payment to Non-Filers of Income Tax Returns
People who usually do not file their income tax returns are also eligible to receive the Economic Impact Payment from the IRS. Such persons will include Senior citizens, Social Security Recipients, Persons with disability benefits, VA Compensation, and Retirees. The Internal Revenue Services will determine the required persons using the information filed with Forms SSA-1099 or RRB-1099. IRS will also automatically carry out these payments. IRS will send the payment via mail to the communication address available as per relevant authorities or updated as per United States Postal Services.
What is the Economic Impact Payment Notice 1444 issued by the Internal Revenue Services?
The recipients of the Economic Impact Payment shall receive a payment notice 1444 from the IRS. The Internal Revenue Service Department will mail the Payment Notice 1444 with the necessary details. The Notice 1444 shall provide details of the amount of payment received and the mode of payment. It will also notify information about the process of reporting instances of non-receipt of payment under the scheme.
Most recipients of the payment have already received the payment notice 1444. This Notice is issued directly from the White House. The format of the Notice is similar to a letter and not a regular IRS notice. The IRS has the responsibility to mail the Notice to the last known address of the recipient within 15 days of the transfer of payment.
What is the purpose of Payment Notice 1444 concerning Economic Impact Payment during the Tax Filing Process?
The Payment Notice 1444 is of substantial importance and must be kept intact with your tax records. Use the Payment Notice 1444; if any person believes that the Economic Impact Payment received is less. He can claim additional credit with the same.
Keep in mind not to misplace the Payment Notice 1444. The Notice must be adequately kept with the tax records as it is the proof of receipt of actual payment under the scheme. One must retain the Notice with essential tax documents like 1099 received from Banks, W-2s from Employers, and supporting records to claim tax deductions. The IRS has already advised taxpayers to retain all the essential tax documents related to returns filed for at least the past three years.
Claim for Refundable Credit in case of Receipt of Lesser Economic Impact Payment
There may be instances of significant difference between the filing status in the preceding years and the income earned along with the number of dependents in 2020. Hence, in specific scenarios where the Economic Impact Payment was less than the entitled amount based on the 2020 return, the person will be eligible for the difference amount as a refundable credit.
Let us understand the above situation with a hypothetical case. Jack and Jill, a newly married couple, filed a joint return in 2019. They had an Adjusted Gross income of less than $150,000. The couple received an economic impact payment of $2,400. However, Jack and Jill had their first child in 2020. The credit, when calculated on the basis of the 2020 return sums up to $2,900, which includes an additional $500 for the baby. The couple received just $2,400. They are entitled to advance payment of $500. IRS will treat the $500 as a refundable credit for their 2020 income tax return. First, the authorities will set off the additional credit of $500 against the amount of tax payable, and then refund any excess credit to the joint filers.
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