In e-News for Tax Professionals, the IRS has explained the tax implications of receiving an economic impact payment (EIP).
As part of the CARES Act, IRS is making economic impact payments (EIPs) to certain taxpayers. The IRS will mail Notice 1444, Your Economic Impact Payment, to every EIP recipient’s last known addresses within few weeks after the EIP is made. That form shows the amount of the recipient’s EIP.
Tax implications of EIPs:
The IRS notes that the EIP is considered an advance credit against 2020 tax. Taxpayers will not include the payment in taxable income on their 2020 tax return or pay income tax on the payment. It will not reduce a taxpayer’s refund or increase the amount of tax a taxpayer owes when the taxpayer files a 2020 Federal income tax return next year. When a taxpayer files a 2020 tax return next year, the taxpayer may claim any additional credit for which the taxpayer is eligible. The IRS is not able to correct or issue an additional payment at this time and will provide further details on IRS.gov on the action individuals may need to take in the future. The e-News article also informs tax professionals that they should remind their clients to retain their Notice 1444.