Editor’s Note: This is part 1 of a 3-part series by Wilmington College Assistant Professor Allen Beatty.

As an IRS Enrolled Agent, CPA, Assistant Professor of Accounting at Wilmington College, and owner/operator of Apple Tax Services, I find myself entering a tax season like no other in over 25 years of preparing taxes.

One of the surprising and perhaps frustrating aspects for many taxpayers who look for that refund is that the IRS will not start accepting tax returns until Feb. 12. For comparison, the season usually opens the day after the Martin Luther King Jr. holiday.

A few years we have experienced some budget haggling involving government shutdowns in January that caused a delay. However, the start date was well before nearly Valentine’s Day!

The delayed start is to verify the IRS systems are fully compatible with commercial software systems and up and running properly with all of the changes this year — namely the Consolidated Appropriations Act of 2021 or “Stimulus 2.0”, if you will. That was the second round of stimulus that few received on New Year’s Eve while others received payments in January.

Of course, the other groundbreaking law was the CARES Act in March or “Stimulus 1.0”, if you will. There are also some state of Ohio income provisions that need to be considered that roll off the federal laws at least in part.

This article is not meant to be a full explanation of these tax laws. Rather, it is meant to be an attempt to share the highlights of key provisions for individuals I encounter at the college’s VITA (Volunteer Income Tax Assistance) program or in my own small practice and other similar taxpayers in the Clinton County community.

Stimulus payments

Of course, the news item that received the most notice were the stimulus payments. The CARES Act provided for payments of $1,200 to eligible adults (single and married filing separate filers) of $75,000 of AGI (Adjusted Gross Income), which starts to phase out from $75,001 and $99,000.

Payments of $2,400 for couples married filing joint on the last known tax return (2019 or 2018) with AGI of $150,000, which starts to phase out at $150,001-$198,000.

Head of Household filers were entitled up to $112,500 with phase outs between $112,501 and $136,500.

Parents also received $500 for each qualifying child (it should be noted a “child” is a child under the age of 17 when the tax return is filed)

Fortunately, these payments are not taxable, nor do they reduce credits for 2020! However, you will need to know these payments when preparing your taxes because you may be entitled to additional amounts.

For example, we had a new grandchild in the family born in October. Since he was not in the system for the latest tax return his parents didn’t receive the $500 in the spring.

This issue comes around again for “Stimulus 2.0” in late December/early January. Furthermore, many taxpayers have arrangements of rotating the child on the return each year. The payments are for 2020 tax year.

Thus, if a parent had filed before the COVID shutdowns for a 2019 return that parent received the payment — even though they really shouldn’t have because it was not his/her time to claim the child in 2020! Therefore, when preparing the return the parent who claims the child in 2020 will receive an extra $500 on the 2020 return if the child was not calculated in the stimulus amounts.

This leaves the question about the parent who received the payment. Fortunately, the government is allowing that parent to keep the payment. Thus, it is entirely possible a payment will be received twice for the same child but paid to two different households!

The combinations even get trickier if one parent had filed the 2019 return before the shutdowns and one parent had not filed for 2019 yet leaving his/her stimulus payments based on the 2018 return!

So, who are the losers on the stimulus payments?

Actually, survivors of deceased taxpayers lose the most. I have one tax client who didn’t file a 2019 return before the shutdown receive a check for her deceased husband whom she had filed a return for 2018. The kicker is the check was made out with “deceased” in front of his name!

The IRS expects payments made to deceased people to be paid back to them.

As for the second round of payments, the rules were very similar. However, instead of $1,200 per taxpayer it was reduced 50% to $600. Oddly, the amount for qualifying children was increased to $600 each.

How does one keep track of all of this? In the spring IRS notice 1444 was sent to taxpayers. Unfortunately, few people kept these notices.

If your payment was direct deposited you can easily obtain a bank statement. It is my understanding the same procedure will occur for the payments in late 2020 and early 2021.

Also, if a person normally doesn’t need to file and receives only Social Security as their source of income, they would have received these payments as well.

A few citizens who don’t receive Social Security or normally don’t need to file were able complete a short page on the IRS website up through November.

If you missed your chance you can now file a tax return for these payments. Another point of confusion is some people were sent pre-paid debit cards rather than checks.

I have heard reports that some taxpayers thought the debit card was junk mail or a scam. Thus, they discarded them.

Allen “Al” Beatty, EA, CPA, MT is an Assistant Professor of Accounting at Wilmington College.