The CARES Act (H.R. 748) has now been passed by Congress and signed by the President. This is like raw meat for tax geeks. I dropped everything, sequestered myself, and read until my eyes watered. Here are some of the most frequently asked questions that my most valuable clients are asking and my best efforts at answering them. DISCLAIMER – I PRESENTLY believe the answers to be true based on the text of the bill and some educated conversations with mentors and other tax geeks. Please contact me directly for clarifications.
The stimulus payments being sent out are REALLY advanced tax credits. I believe eligibility will be based on 2020 taxable income, but the advance payments being sent out will be based on 2019 adjusted gross income (AGI). If you have not filed for 2019, it will be based on 2018 AGI.
It is easy to speculate that if someone doesn’t receive an advanced payment now they will be able to claim the credit on their 2020 tax return as long as they qualify based on the current year. But that is still speculation.
The payments are up to $1200 per adult and an additional amount up to $500 per qualifying child generally a child under the age of 17 at the end of the tax year.
Taxpayers who filed tax returns in 2019 or 2018 and meet the eligibility criteria, and/or who received Forms SSA-1099 or RRB-1099 for 2019 will get the payments.
It is presently UNCLEAR when the $$ will show up in your bank account. Earlier this week Treasury Secretary Mnuchin said within 3 weeks but my sources inside the IRS say that April 17th is an estimated date and that late May is more realistic.
Payments Will Be Sent Out Based On The Following Order:
1.Adjusted Gross Income (AGI) for 2019 (See 1040 Line 8b)
2.If no 2019 tax return filed, AGI for 2018 (See 1040 Line 7)
3.If no 2019 or 2018 tax return filed, recipients of SSA-1099 & RRB-1099 forms should receive payments.
What AGI Qualifies?
-Married Filing Joint (MFJ) taxpayers: AGI up to $150,000
-Head of Household (HOH) taxpayers: AGI up to $112,500
-Single / Married Filing Separately (MFS) taxpayers: AGI up to $75,000
-UNCLEAR: What about Qualfied Widow(er) Filing Status?
What Is The Phaseout Range For AGI?
-MFJ AGI $150,001 – $198,000 (with no qualifying children under age 17)
-MFJ AGI $150,001 – $208,000 (with one qualifying child)
-HOH AGI $112,501 – $136,500 (with no qualifying children under age 17)
-HOH AGI $112,501 – $146,500 (with one qualifying child)
-Single / MFS AGI $75,001 – $99,000 (with no qualifying children under age 17)
-Single / MFS AGI $75,001 – $109,000 (with one qualifying child)
Who Is Not Eligible At All?
-Anyone claimed as a dependent for the tax years in question
UNCLEAR: Whether NRAs with SSN valid for employment qualify?
-Anyone with an ITIN instead of SSN, unless their spouse is a member of the Armed Forces
What If You Were Claimed As A Dependent For 2018 & 2019 But Will Not Be A Dependent For 2020?
-If this is structured the same way the 2008 Stimulus payments were, you should be eligible for a tax credit on your 2020 tax return.
Should You Amend My 2019 (or 2018) Tax Return To Say I Was Not A Dependent?
-NO. First of all, if you qualify to be claimed as a dependent based on IRS guidelines, this could be considered fraud.
-Filing a fraudulent tax return just to get the stimulus payment is probably going to result in you having to repay the stimulus payment plus penalties and interest.
-Amended tax returns take about 4 months to be processed by the IRS so it probably wouldn’t be processed in time anyways.
What If You Did Not File Tax Returns For Either Years?
-Try to e-file your 2019 tax return as quickly as possible if you have everything you need to file a complete & correct tax return. E-filed tax returns usually take about 2-3 weeks to be processed; we don’t know the timeline for when the checks will be sent out.
-2018 can be e-filed if you go through a tax professional with that capability.
-If you received either an SSA-1099 and/or RRB-1099 in 2019 you should get a stimulus payment, even if you didn’t file a tax return.
-Presently UNCLEAR: If you were claimed as a dependent on another taxpayer’s return for 2019 you may not receive a stimulus check.
What If You Need To Update My Mailing Address And/Or Direct Deposit Information With The IRS?
-You can file Form 8822 to update your mailing address with the IRS. I don’t believe there is any way to update your Direct Deposit information if your bank account number used on a 2019 or 2018 tax return has changed.
-Please DO NOT CALL the IRS at this time.
What If You Did Not Have Taxable Income For 2019?
If you had any interest in a bank account for 2019, you can try e-filing with interest income if it was at least $0.50 (rounded up to $1).
What If You Owe Back Taxes?
You are in luck, this exception was included in the bill & you should still get a stimulus check. This applies to federal and state tax debts.
What If Your Student Loan Is In Default?
You are in luck, this exception was included in the bill & you should still get a stimulus check.
What If You Owe Child Support?
-You are NOT in luck, any taxpayers with past due child support reported to the Treasury Department will not be receiving a stimulus check if the amount owed is larger than the stimulus payment.
-There may be relief for MFJ taxpayers who filed Form 8379 with their recent tax returns. https://www.irs.gov/forms-pubs/about-form-8379
Should You Call The IRS?
Only if you are a glutton for punishment. First, check the following sources:
What If You Receive The Stimulus Payment But Do Not Qualify For It?
“Except in cases of fraud or reckless neglect” you shouldn’t have to pay back any portion of the stimulus payment on your 2020 tax return if you don’t qualify based on 2020 AGI.
What If You Are On Social Security And Do Not File An Income Tax Return?
You are in luck. The IRS should use your bank info on file with the Social Security Administration to directly deposit you stimulus payment.
Have A Question? Contact John Dundon.