OP was fostering her nephews for all of 2019 and the first few months of 2020. She (apparently properly) claimed the kids as dependents in
2019. She received a stimulus check of $500 with respect to each of the children.
Who gets to keep the money, she or the kids' parents, who are now taking care of the kids?
I haven't taken the time to read the bill, but my guess is that it wouldn't have dealt with this kind of situation. My thought is that it should go to the parents (or at least pro rated for 2020) because it's to help in 2020, not a tax refund for 2019.
According to the law as written, she does. If the parents can claim the children as dependents in 2020, they will get an additional $1000 when they file their 2020 tax return.
Yes, it is double dipping. Yes, that's the way the law was written.
This sounds vaguely similar to the situation with my daughter, which I posted about here several weeks ago. She and her ex-husband share custody of their one son 50-50, and by the terms of their court-approved divorce settlement, she files as HOH and gets all tax breaks for the child in odd-numbered years and he does the same in even-numbered years. Now whether or not she actually has the child for more than 50% of the days in odd-numbered years and he in even-numbered years is a different issue, which we discussed here pretty extensively - so let's just assume that the even and odd year thing is legally correct.
So for 2019, she properly filed as HOH, took the tax breaks allowed for her, filed her return electronically and got a refund (meaning the IRS had all her bank info), and then on April 15 she received a $1700 stimulus payment which included $500 for her child. Under terms of their divorce settlement, for tax year 2020, the ex-husband will be allowed under the agreement to file as HOH and take the breaks, so I guess you're saying that when he files his 2020 return, he will also get $500 for the child? Doesn't the IRS do some kind of SSN validation to assure no one "double dips" like this?
This has to be a relatively common situation where a person for whatever reason is declared as a dependent by different people in 2019 vs. 2020.
The payment is technically a refundable tax credit based on a 2020 tax return. The amount people receive now is an estimate based on 2018 or
2019 tax returns. If the current payment is too much or is sent to the 'wrong' person, the money can not be clawed back.
OP keeps the money. If someone other than OP claims the kids on a 2020 return they will also get a $500/child payment. Many divorced couples with kids will have little problem double dipping if they cooperate with each other.
I have seen occasional passing references to this, but I spent some time searching the IRS site and couldn't find confirmation. Possibly I just didn't choose the right search terms. Can you point me to the URL where it's characterized as a refundable credit and can be adjusted upward, not downward, on our 2020 returns?
Why this matters to me is that if the IRS uses my 2019 return I'll get the full $1200 but if they use my 2018 return I'll get only part of it. It would be good to know now that I can collect the rest with my 2020 filing, if that's the case.
Thanks for that. I've seen Kitces' analyses on wash sales, and found him readable and informative, so it's no surprise that he did a good job with CARES. I had been under the impression that that if we got less than $1200 now, we'd make up the full difference when filing for
2020 taxes, but from his article I see that the income tests will still apply then, so higher-income people will never get the full $1200.
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