Who is eligible for ‘inflation relief’, when it arrives

It’s official: Most Californians who filed their taxes in 2020 will receive one-time payments totaling about $9.5 billion from the state starting in October to help offset rising inflation.

The Franchise Tax Board has set up a webpage with some of the details and a calculator where people can estimate their payment.

The Legislature passed an election-year bill, AB192, authorizing the payments with zero votes against, and Gov. Gavin Newsom signed it into law as part of his budget package on Thursday.

The bill called these payments “Better Refunds for Families,” but the tax board calls them “Middle-Class Tax Refunds,” even though couples earning up to $500,000 in adjusted gross income in 2020 and individuals earning up to $250,000 are eligible.

The name is fitting because “almost everything will go to middle-class people, just in numbers,” said bill co-author Phil Ting, D-San Francisco.

Here are some questions and answers about the refunds and how they compare to the Golden State Stimulus payments the state authorized last year.

Who is eligible?

To get a refund, you must have filed a 2020 California tax return by October 15, 2021 (or by February 15, 2022, if you applied for an individual tax identification number and did not receive it by October 15, 2021).

Also, you must:

• Meet income requirements.

• Have been a California resident for at least six months in 2020.

• Be a California resident on the date the payment is issued.

• Were not eligible to be claimed as a dependent on someone else’s 2020 tax return.

How much does reimbursement cost?

The refund amount will be based on the adjusted gross income reported on your 2020 California tax return. It can be found on line 17 of your Form 540 2020 or line 16 of Form 540 2EZ.

The refund will be an amount if you had no dependents with an additional lump sum payment if you claimed a tax credit for one or more dependants. (Additional payment is not per dependent.)

For single registrants, the refund will be:

• Income of $75,000 or less: $700 with a dependent/$350 without

• Income from $75,001 to $125,000: $500 with a dependent/$250 without

• Income of $125,001 to $250,000: $400 with a dependent/$200 without

For married couples declaring jointly, the refund will be:

• Income of $150,000 or less: $1,050 with a dependent/$700 without

• Income of $150,001 to $250,000: $750 with one dependant/$500 without

• Income from $250,001 to $500,000: $600 without dependants/$400 without

For those filing as head of household or surviving spouse, income brackets are the same as for married couples, but reimbursements will be: $700/$350 for lowest bracket, $500/$250 for the middle bracket and 400/$200 for the highest bracket. .

When will payments be made?

The Franchise Tax Board expects to begin sending them between late October and mid-January.

How will I receive my payment?

If the FTB has your banking information, usually because you had a regular tax refund deposited into a bank account, you will receive a direct deposit into that account. If FTB does not have your banking information, you will receive a debit card.

Will undocumented immigrants be eligible for a payment if they have filed a 2020 tax return and meet other requirements?

“Our understanding is that they would,” HD Palmer, a California Department of Treasury spokesman, said by email.

Are tax refunds taxable?

The bill exempts the payments from state income tax. However, “it is up to the IRS … to determine whether tax refunds are taxable” on federal returns, Palmer said.

The purpose of the payments is to provide “financial relief to Californians who may have been impacted” by “increased costs of goods, including gas, due to inflation, supply chain disruptions, effects of the COVID-19 emergency and other economic pressures.

In the past, the IRS has issued several tax rulings stating that “payments made under statutory benefit programs for the promotion of general welfare are not included in gross income”, Mark Luscombe , principal analyst at Wolters Kluwer Tax & Accounting, said via email.

Based on the California bill’s statements — that the payments are not state income tax refunds and their purpose — and that the refund decreases as income increases,” the legislation was likely developed enough to meet IRS requirements to be non-taxable for federal tax purposes,” Luscombe said via email.

Can dependent children who work part-time and file a tax return get one?

No, not if the child was a tax dependent.

Can I get a payment if I haven’t filed a tax return?

No, and that means many low-income people won’t get them.

Many Californians are not required to file tax returns, usually because their income is below the threshold required for filing. However, many of these people file taxes anyway, usually to recover taxes withheld from their wages or to claim refundable tax credits, such as the Earned Income Tax Credit. If you qualify for a refundable tax credit that is greater than the tax you owe, the government will send you a check for the difference if you file a tax return.

Palmer noted that in 2020, “there were 500,000 additional tax returns filed in California, presumably to qualify for a Golden State Stimulus payment or possibly even a federal relief payment.”

Sara Kimberlin, senior policy analyst at the California Budget & Policy Center, said the refunds are part of a larger budget package that contains items “designed to provide support for people who have not had to file tax returns. income”.

For example, it will increase monthly subsidies for low-income families with children enrolled in CalWORKS by 21% over the next two years. It will increase additional state payments for low-income seniors and people with disabilities by $39 per month for single adults and about $100 per month for couples starting in January 2023. And families n will no longer need to have earned income to qualify for the state’s young child. Tax credit, which is worth $1,000 for a low-income family with a child under six, Kimberlin said.

How do these new tax refunds compare to Golden State Stimulus payments?

Both required people to file a 2020 tax return, but “the target populations are very different,” Palmer said.

Last year’s payments went to people who had $75,000 or less in adjusted gross income, including those who filed their taxes with an individual tax identification number. Some undocumented immigrants file an ITIN and are not eligible for federal stimulus payments.

The new program “is for everyone except very high-income Americans,” Palmer said.

He noted that as of early May, about 11.5 million 2020 tax returns had received Golden State stimulus payments totaling $8.9 billion.

The new payments are expected to go to 17.5 million filers and total $9.5 billion.

In addition, last year’s payments were made by direct deposit or cheque; This year, deposits will be made by direct deposit or by debit card through a third-party provider who can send them “about the same time” as direct deposits.

Kathleen Pender is a freelance writer and former columnist for the San Francisco Chronicle. Twitter: @KathPender

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