Fact or Fiction: Are the coronavirus stimulus checks a loan?

BIRMINGHAM, Ala. (WBRC) - The IRS began depositing federal stimulus checks of up to $1200 for individuals and $2400 for married couples with an additional $500 for each child 16 and younger, into taxpayer bank accounts April 9.

The checks were meant to offer some financial relief, but they also caused a bit of confusion.

Below we answer some of our viewer questions about the 2020 Cares Act stimulus checks.

· Is the Stimulus check a loan?

According to the CARES Act, no. The stimulus checks are a no-strings-attached payment meant to help your family out during an economic downturn.

· If it is not a loan, what is it?

The payments are “refundable tax credits” towards next year’s taxes.

Think of it as a gift card to a restaurant; when you apply it to the bill, it reduces what you owe.

As for taxes, you do not owe any money when you file next spring. According to TaxFoundation.org, because the money is a refundable credit, it is your cash. No strings.

· Is the stimulus check an advance payment on next year’s tax refund? Will I get less back on my refund?

No. The one-time stimulus payment is an advance on a refundable tax credit meant to offset your 2020 federal income taxes but instead of waiting until 2021 to get the cash, you get it now.

The stimulus check will not lower how much you get back in a refund next year. In fact, it could increase how much you get back.

Tax credits do not decrease the amount of refund you get back because a refund is simply the amount of money you overpaid in taxes the previous year.

A tax credit reduces how much you owe in taxes.

By the time you file taxes you would have already paid the collector, and since a tax credit lowers your tax bill, you may have overpaid more than you should have, so you get that money back.

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