On March 27, Congress passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act, which highlights economic relief for taxpayers and small businesses nationwide. There’s no doubt that Americans are feeling the financial strain of COVID-19 and many taxpayers are awaiting much needed economic help. Thankfully, that help is now soon to come. The IRS has announced that within weeks the IRS and U.S. Treasury will begin to send recovery tax rebate payments, known as Economic Impact Payments, to taxpayers. In this Q&A, taxpayers’ questions are answered, including what to do next to get your check.
What is the Economic Impact Payment?
In hopes to curb economic strife, Congress wants to stimulate the economy during hard times, by offering immediate relief to taxpayers. The stimulus tax rebate also known as the Economic Impact Payment is an advance payment of a 2020 tax credit that most taxpayers will be eligible to receive.
Who qualifies for the payment and how much will the check be?
Taxpayers who filed a 2018 or 2019 tax return and Social Security Beneficiaries qualify for the advance economic impact payments. Single people are eligible for $1,200, married taxpayers will receive $2,400, and taxpayers are to receive an extra $500 per qualifying child.
The payment is reduced by $5 for every $100 between the phase-out amounts and phases-out for those who file Single at $75,000-$99,000; Head of Household at $112,500-$146,500 and $150,000-$198,000 for married filers, eliminating the payment completely after reaching phase-out limits.
Who’s considered a qualifying child?
A child who qualifies for the Child Tax Credit is a qualifying child for the Economic Impact Payment. Generally, the child must be your dependent, lived with you over six months of the tax year, you provided over half of their support, and were under 17 during the tax year in review. They must also be a U.S. Citizen, U.S. Resident or U.S. National. IRS Publication 972 gives more insight into Child Tax Credit Rules.
What about my college-age dependents? They qualify for EIC so aren’t they a qualifying child for this?
No, unfortunately, they are not. Dependents 17-24 do not qualify for the child tax credit, so they will not qualify for the additional $500 payment, even if they were claimed on your return. Students between ages 18-24 who were not a dependent on another return and had income but were not required to file should file their tax return as soon as possible to receive the stimulus payment amount.
How will I receive my check?
Many people will automatically receive the payments from the IRS. The IRS expects to direct deposit most checks and mail the rest. The taxpayer’s direct deposit info and latest address on file will be determined by the latest tax return on file. For those whose correct info is not on file, the treasury plans to create an online portal to update banking information, so that taxpayers will receive their payments quickly.
Does my 2019 tax return need to be filed to receive my Economic Impact Payment?
Not necessarily. The IRS will base the payment on 2019 returns or 2018 returns if your 2019 return hasn’t been filed yet. If you didn’t qualify in 2018 but you think you did in 2019, it may be in your best interest to file as quickly as possible. If you didn’t qualify in 2018 or 2019, it’s possible to be eligible for the rebate on your 2020 tax year return. Though you wouldn’t receive an advance payment this year, you would receive the refundable tax credit payment you’re eligible for when you file this year’s tax return in 2021.
I didn’t qualify in previous tax years but due to the impact of the coronavirus, I qualify now in 2020.
Unfortunately, if you did not meet the economic impact payment qualifications during the 2018 or 2019 tax year, you won’t be receiving an advance of the 2020 tax credit but you may still be eligible to receive it next year when you file your 2020 tax return.
I wasn’t required to file a tax return for 2018 or 2019, can I still get an Economic Impact Payment?
If you weren’t required to file in 2018 or 2019 you may still qualify for the Economic Impact Payment. Certain groups such as low-income taxpayers, Social Security beneficiaries, veterans and others with disabilities are still eligible for the advance payment. These individuals can file a simple tax return in order to qualify.
How will I be affected when I file my 2020 taxes?
The Economic Impact Payment is an advance of a 2020 refundable tax credit. If you do not qualify based on 2018 and 2019 returns, you may qualify to still receive the credit when filing your 2020 tax return. If you received advance payment and would have been eligible for more based on your 2020 tax situation, you will receive the additional amount on your 2020 tax return, and if you qualified in prior tax years but would not have been eligible based on your 2020 tax return, you will not be required to pay the advance payments back.
Who does not qualify?
Taxpayers and dependents are required to have a work-eligible Social Security number to qualify for the tax rebate. And taxpayers may not owe any back child support to receive the payments.
I owe back taxes or student loans, Will the IRS still send me a check?
As we know, people want their money but under these circumstances some debtors will have to wait. Refund offsets are being suspended for now. So even if your refund was previously offset most people should still receive their payment unless they owe back child support.
Reportedly, the estimated impact payment will be out within the next few weeks and automatically sent to taxpayers, meaning there may not be much for you to do. If you need to change your address, update direct deposit info or file a simple return to qualify, keep your eyes open for additional IRS guidance. The IRS is in the process of figuring out exactly how this thing is going to work, but it plans to launch an awareness campaign to help taxpayers know what to do next.
Stay tuned to IRS.gov/coronavirus for additional guidance on the Economic Impact Payment or for more information regarding COVID-19 and your taxes. To view the details of the CARES Act Bill visit congress.gov.
Brittany Sabalza, enrolled agent, is director of continuing education for Pro Tax Solutions Indianapolis and a tax columnist.