The payments being sent out or direct deposited by the IRS to your bank account are an advance on a credit that will be reconciled when you file your 2020 tax return. The CARES Act grants individuals with Adjusted Gross Income (AGI) of less than $75,000 and married couples with AGI of less than $150,000 a refundable credit of $1,200 for singles and $2,400 for married couples. An additional credit of $500 is allowed for each qualifying child of the taxpayer.
For purposes of the credit, an “eligible individual” is any individual other than a non-resident alien OR an individual for whom a dependency deduction is allowable to another taxpayer for the tax year.
The amount of the credit is reduced (but not below zero) by 5% of the taxpayer’s adjusted gross income (AGI) in excess of: (1) $150,000 for a joint return, (2) $112,500 for a head of household, and (3) $75,000 for all other taxpayers.
The stimulus payment currently being sent out by the IRS is an advance of these refundable credits.
If you do not receive a payment as an advance stimulus payment OR if you do not receive the correct amount this will be dealt with when you file your 2020 federal income tax return.
The amount of any credit due on your 2020 tax return is reduced, but not below zero, by the amount of advanced credit you received. This means if you got a credit of $1200 based on your 2019 AGI but are not entitled to the credit based on your 2020 income you will NOT have to repay any excess payments received.
If you did not get a payment based on your 2018 or 2019 income tax returns but do qualify based on the income reported on your 2020 return any additional amount you qualify for will be paid after you file your 2020 tax return.
What does all this mean to you? It boils down to this: if you don’t get a payment you are going to have to wait until you file your 2020 return to get your payment. So, if you are entitled you will get your payment is just might take a while. If you do get the advanced credit and get too much, you get to keep what you got and not have to repay it.