Tax tuesday

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Whether you have irish eyes or not, millions of folks are smiling last week because their third stimulus payment officially started to hit bank accounts and mailboxes and we have thomas bay from the college finance school of charleston.

How are you?

Thank you.

I don't know how to react to an introduction like that.

You know, it's st.

Patty's day all month long, which is why we're wearing green.

We love talking about green and some people got some green starting on st.

Patty's day, so tell us more about the stimulus checks?

That's right.

It was the third round of stimulus payments, the bill passed back in the first week of march, and what happened is they said $1400 for you and $1400 for each dependent provided that your adjusted gross income was below certain limits, which was about $75,000 if you're single, $150,000 if you're married filing joint and phasing out just a little bit as you went over those income limits, so you might have got less than what you would have been expecting possibly, but that would have been a lie.

Now, this is going to work exactly the same way when it comes to file the 2021 returns this time next year.

Do we know if the stimulus payments are going to be taxed or not taxed?

The irs has already said one thing about them, and that it will not be taxed.

What they are is in an advanced payment of a tax credit that is going to be claimed on next year's tax return, and the good news is when you do next year's tax return, you go back and calculate what the credit should have been.

If you didn't get enough this time, you get the rest back as essentially a payment towards your taxes, which can increase your refund.

If you got too much, good news, you don't have to pay it back.

Okay, that's good news indeed.

And as far as it going directly into your bank account versus your mailbox, how does that get determined?

A lot of it was determined on whether or not you put information in for your first stimulus payment on the irs's tool last year.

They used a lot of the same information to make these stimulus payments, because they already had things set up.

You might have delays if you submitted your tax return right around the time the stimulus payments were going out, that might delay it a little bit, and if you moved, or if you change banks.

If you change banks, the irs will send you a check in the mail.

But, again, if you don't get it, file it as credit in next year's tax return.

If people didn't get their check and believe they should have, go to get my payment on the irs web site.

So unemployment no longer taxable for 2020, tell us more about this?

Okay, you might remember on an earlier episode, i talked about how i didn't expect anything to happen, because when changes happen during tax season, it causes a huge headache.

Guess what?

Something has happened and causing a headache with unemployment.

So what ends up happening is that if you already filed, you are probably going to have to file an amended tax return to get refund essentially, because if you already claimed it as taxable income, because now it no longer counts as taxable income for 2020 only, you can get a refund of you had originally paid into it based on withholding and stuff like that.

If you haven't filed yet, not of the unemployment would be taxable, but i would wait a week or two for official guidance from the irs, so remember, this just got dumped into their lap, and they have to figure out how it will work.

It will take 12 to 16 week's to process, so don't hold your breath.

This is good news.

Not getting your unemployment tax, that essentially is worth the headache.

Right, it's the first $10,200 of unemployment is not taxed below your income was below $150,000 last year, and that fits most people that claimed unemployment last year.

All right, now with just a couple minutes left, let's talk .

Welcome back.

We've been chatting with thomas spade, certified public account tact and we didn't get this in the last segment, that is the new child tax credit, so can you tell us more about this and how it works now and how it used to work?

Okay, how it used to work, when you filed your tax return, you would get what was called a child tax credit, it was $2,000 if you have a child on a tax return that as of 11:59 on december 31st, you got that child, you got a $2,000 tax credit provided the child as of that same time was under age 17.

Now, here's how it's going to work.

They've increased it from 2,000 to 3,000, and if the child is under six years old, it's $3,600 and the $3,000 credit also has been extended to children age 17, but here's where it gets really interesting, before you would wait until you filed your tax return to claim it, and what would happen is that would just count as a credit towards your tax liability, some of it up to $1400 was actually able to generate a refund.

Now, the whole thing can be used to generate a refund, so if your tax is zero, you could potentially get a $3,600 refund as a result of the child tax credit.

The other way that this works is that starting this year in 2021, they're going to start sometime in july, i think, sending advance payments periodically of half of the child tax credit, so the idea here is what congress wants to do, i should say is they want to send people half of the child tax credit upfront, so they would want to send one sixth of $1800 if you had a child under five years old, so that is where the $250 came from for some people and $300 for other sources from other sources and it's essentially an advance towards a tax credit you would claim on your 2021 return.

So i suppose this helps people, though, instead of having to wait until the next tax filing season to make up for that money that they get a little bit now, is that the idea?

That's the idea, but there's a big caveat about this that i'm warning everybody about, the stimulus payments work the same wa, they are advance payments of the tax credit on next year's tax return, but unlike the stimulus payments, you might have to pay some of this back, and what i mean by that, you won't get as much of a tax credit on your tax return because you have got some of it upfront and the irs and congress said when they passed the bill that they want to let people opt out of this if they want, so what i'm telling everybody, yes, this is a good thing, and if your income is below 40 and $60,000, depending on your filing status, you'll still get the full credit even with the advanced payments, but for most people, i have a feeling that the refunds may actually decrease, so if you're expecting a big tax refund, it might be a little bit lower because you have a little bit of it upfront starting in july.

Thomas, my head is completely swimming, and that is why we bring you on the show to spell it all out for us.

I want to thanks so much.

I would be remiss if i didn't end with this, i have to ask, any news on the home office deduction?

No new news yet.

I did actually sent information to our local representative.

About it yet, but let's see if something comes down the pike about it.

We'll keep calling and checking in.

I want