Is the Stimulus Check Just an Advance on the 2020 Tax Refund?

No, the stimulus check you receive does not solely represent an advance on your 2020 tax refund. While Congress did indeed include the stimulus checks as a tax credit for 2020, the check you receive now is a separate payment, independent of your final tax refund.

Understanding the 2020 Recovery Rebate Credit

When you file your 2020 tax return, you will calculate the amount of the refundable credit you qualify for. If you received the exact amount you should have, the matter is concluded. However, if you received less, you will receive the difference as a refundable credit. Conversely, if you received more than you should have, you get to keep the overpayment.

The Tax Code and the Recovery Rebate Credit

According to the legislation passed by Congress, the Recovery Rebate Credit is detailed in Section 6428 of the Internal Revenue Code. Specifically, the law states that for an eligible individual, a credit against the tax imposed by Subtitle A for the first taxable year beginning in 2020 is allowed. This credit amount includes $1200 for joint filers and $2400 for those with qualifying children, among others.

Advance Refunds and Credits

Described in Section 6428, the advance refund mechanism is intended to provide taxpayers with immediate financial assistance. According to the legislation, each individual who was an eligible individual for their first taxable year beginning in 2019 shall be treated as having made a payment against their tax for such taxable year in an amount equal to the advance refund amount for such taxable year. The advance refund amount is determined based on the data reported in 2019, 2018 if no 2019 return was filed, or Social Security benefits for 2019.

Reconciliation with the 2020 Tax Return

The actual credit amount is based on the 2020 tax return data, which becomes clear after the return is filed. When your 2020 returns are eventually filed, the finally determined Recovery Rebate amount will be reconciled with the Advance Refund Amount. If the RR amount is higher, you will receive a credit for the difference on your filed 2020 returns. Importantly, the legislation implies that you do not have to repay any overpayment if the RR amount is lower.

Conclusion

In summary, while your 2020 stimulus check was indeed structured to serve as an advance under the tax code, it is a separate payment that does not obligate you to repay the check if your final 2020 tax refund is less than received. Understanding this distinction can help alleviate tax-related confusion and ensure you are fully aware of your tax obligations.