On Friday, March 27th, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security (CARES) act. Out of the $2.28 trillion in stimulus funds, the act provides $290 billion for one-time stimulus payments for individual taxpayers referred to as “economic impact payments.”
Individual taxpayers who meet certain income guidelines will be paid $1,200 with an additional $500 per dependent child age 16 or younger. The following are answers to frequently asked questions regarding the economic impact provision of the CARES act.
1. How do I qualify for the economic impact payment?
- The amount granted depends on your 2019 Adjusted Gross Income (AGI). However, if you have not filed a 2019 tax return, the IRS will use your 2018 return for the calculation.
- If your income exceeded the threshold for the most recent tax return, but it will not exceed it in 2020, you will be given a refundable tax credit when you file your 2020 tax return.
- If your AGI did not exceed the threshold for the most current tax return available, but it will in 2020, you will receive your impact payment. However, you will not be required to pay it back.
- If you are eligible, payments are automatic; no application is needed.
2. What are the income limitations?
- Single filers who had AGI of $75,000 or less can expect a $1,200 payment.
- Married tax payers filing jointly with AGI of $150,000 or less can expect a $2,400 payment ($1,200 per person).
- Those filing as heads of household will be granted a check with AGI of $112,500 or less.
- Filers with dependent children age 16 or younger will qualify for an additional $500 payment for each child.
- If your income is above those thresholds, your payment will be reduced by $5 for each $100 earned above the $75,000 cap. For example, $50 will be subtracted from the payment amount for every $1,000 of income above the limits. For a single filer with no children, the payment zeroes out at $99,000.
- Those who are not collecting social security and who have not filed a tax return may need to do so in order to receive the economic impact payment.
3. What if I only collect social security and do not have enough income to file a tax return?
- On April 1st, the U.S. Department of the Treasury and the IRS announced that Social Security recipients who have not filed a tax return will automatically receive the payments directly into their bank accounts.
- If you are receiving social security benefits but are claimed as a dependent on someone else’s tax return, unfortunately, you will not receive an economic impact payment.
4. When and how will I receive the payment?
- U.S. Treasury Secretary, Steven Mnuchin, said the first round of payment is expected to go out between April 15th and April 21st for the taxpayers who have bank information on file with the IRS.
- Social security beneficiaries will be next in line with payments to the same account where they receive their benefit payments.
- Those who have not provided the IRS with bank account information will be paid last.
- Those not required to file a tax return can learn more and upload their bank account information online at www.irs.gov.
5. Will I have to pay it back?
- No. Furthermore, the payments are not taxable.
6. How long is this program available and can I expect more?
- The economic impact payments are available for the rest of the year. Therefore, those who must visit with a tax professional to file but are practicing social distancing will not miss out.
- The Treasury Department has vowed to go back to congress for additional measures, if needed.
- The CARES act was designed to provide liquidity to the economy for ten weeks. If the economy continues to struggle, additional money could be forthcoming.