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Pandemic Checks to Begin Arriving in Early January By Tom Bassett, J.D. East Region Tax Manager
December 30, 2020

 With the $2.3 trillion pandemic aid and spending package now signed into law, the $600 individual “stimulus payments” (subject to income limitations) are expected to start arriving in early January.  The payments may be direct-deposited to a taxpayer’s account.  

It should be noted that these payments are really “advance payments” of a 2020 income tax credit.  Please be aware that:

1. The first payment was based on 2019 adjusted gross income (if a 2019 return was filed, or a taxpayer’s 2018 return, if the 2019 return had not yet been filed).  This second payment will be based only on 2019 adjusted gross income.

2. Both payments are “advance payments” on an actual 2020 tax return credit.

3. Taxpayers will complete a schedule/form (not yet previewed by the IRS) to “reconcile” the credit against the payment.  You will compute the “correct” amount of your 2020 credit on that schedule/form based on your 2020 Adjusted Gross Income (AGI).


The amount of the credit starts to phase out if AGI is over $75,000 for single filers, or over $150,000 for joint filers.

Taxpayers will list the amount(s) of any “advance payments”, which could be the full $1,800 (more if you are filing jointly, and more if you received more due to a dependent) or it could be $0 (if you received no payments for a variety of reasons).  Other points to keep in mind:

1. A taxpayer will compute the difference.

2. If a taxpayer is “owed more,” they should expect to receive a credit on 2020 taxes.

3. A taxpayer may keep any advance payment received that exceeded what they “should have received.”

There will likely be cases where a taxpayer received no advance payment (such as a child who was claimed on another’s return as a dependent for 2018 or 2019) but may be entitled to a 2020 credit, resulting in a credit on the 2020 return for persons no longer holding dependent status.  But the details are not yet clear if those individuals will have to take into account the amount their parent received.
Clients are welcome to call their Commerce Trust Company relationship manager to arrange a discussion.* 

*Always consult with your CPA and professional advisor on matters involving taxes.

Commerce does not provide tax advice or legal advice to customers. While we may provide information or express general opinions from time to time, such information or opinions are not offered as professional tax or legal advice. Consult a tax specialist regarding tax implications related to any product and specific financial situation. 

Past performance is no guarantee of future results, and the opinions and other information in the commentary are as of Dec. 29, 2020. This summary is intended to provide general information only, may be of value to the reader and audience, and may include the opinions of Commerce Trust Company, which are subject to change. 

This material is not a recommendation of any particular security or investment strategy, is not based on any particular financial situation or need and is not intended to replace the advice of a qualified attorney, tax advisor or investment professional. Diversification does not guarantee a profit or protect against all risk. 

Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed, and is subject to change rapidly as additional information regarding the conditions which impact the represented subject matter may change.

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ABOUT THE AUTHOR

Thomas Bassett, JD, MBA, CPA, AEP Vice President, Tax Manager - East Region Commerce Trust Company 
Tom has managed the East region tax team for Commerce Trust Company since joining in 2012. He is responsible for the services his department provides to clients of Commerce Trust in the St. Louis, Springfield, Belleville, Peoria, and Bloomington offices.

In addition to tax planning and consulting services to that client base, his group annually prepares more than 120 returns for charitable trusts and private foundations and more than 350 returns for individual, estate, gift, trust, and partnership clients of Commerce Trust. Tom also co-manages Commerce Trust’s annual tax return preparation process, including reviewing and maintaining Commerce Trust’s accounting system and the integration of this system with the organization’s external vendor.

Prior to joining Commerce, Tom was a manager at BKD, LLP, where he focused on providing tax planning, consulting, and compliance services to high net worth individuals and their businesses in a variety of industries, primarily real estate, healthcare, manufacturing, and distribution. Before BKD, he worked for KPMG, LLP, at various levels, including manager.

Tom attended Washington University in St. Louis, earning two Bachelor of Arts degrees in physics and psychology, a juris doctorate, a Master of Business Administration, and a Master of Science in business administration. He is a member of the Missouri Society of Certified Public Accountants, the American Institute of Certified Public Accountants, the Missouri Bar Association, The Bar Association of Metropolitan St. Louis, the American Association of Attorney-Certified Public Accountants, and the Estate Planning Council of St. Louis. Tom has chaired the audit, investment, and budget subcommittees of the Finance Committee of The Bar Association of Metropolitan St. Louis for several years.
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