From our friend Tim Sundstrom, CPA —
The Coronavirus, Aid, Relief and Economic Security Act (CARES) “economic impact payment” is now law and we have real facts on how the program will be administered.
The law provides for a 2020 income tax credit of up to $1,200 for single individuals and up to $2,400 for married filing joint returns, with an additional $500 for each dependent child who have not attained age 17.
There is no payment to anyone who is 17 years or older who is still a dependent.
Who will receive the CARES Act payment?
Those of you with Adjusted Gross Income (AGI) up to $75,000 for single taxpayers and $150,000 for married filing joint returns will receive the full payment. If your income is above these limits the rebate is reduced. The reduction is $5 for every $100 of income over those thresholds. Single taxpayers without children would not receive a rebate once their income reaches $99,000 or higher. While childless married filing joint filers are eliminated at or above $198,000.
How will the IRS know where to send my CARES Act payment?
Most people do not need to take any action. The IRS will automatically calculate and send the economic impact payment to those eligible. For people who have already filed their 2019 tax returns, the IRS will use their 2019 income to calculate the payment. For those who have not yet filed their return for 2019, the IRS will use information in their 2018 tax filing. There will be no automatic payment for taxpayers that did not file a 2018 or 2019 return. The payment will be deposited directly into the same banking account reflected on the return filed.
The IRS does not have my direct deposit information. What can I do?
In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail. Please wait for an official announcement of the portal. I expect a high level of scammer activity over the next couple weeks. Remember. IRS will not call or email you requesting this information.
What if you don’t receive the correct amount?
The payments will be reconciled on your 2020 tax return. If you receive less than what you are entitled to you will get an additional refund. If IRS advances more than what is due, you will not have to repay the overpayment.
What if I don’t have to file a return, can I still receive my payment?
Yes. People who typically do not file a tax return will need to file a simple tax return to receive an economic impact payment. This is important information for low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities to know because often they are not required to file a tax return. IRS.gov/coronavirus will soon provide information instructing people in these groups on how to file a 2019 tax return with simple, but necessary, information including their filing status, number of dependents and direct deposit bank account information.
I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment?
Yes. IRS urges anyone who has not yet filed a tax return for 2018 or 2019 to do so as soon as possible. Without a filed 2018 or 2019 return you will not receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.
I need to file a tax return. How long are the economic impact payments available?
The economic impact payments will be available throughout the rest of 2020.
Where can I get more information about the CARES Act?
The IRS will post all key information on IRS.gov/coronavirus as soon as it becomes available.
In closing, I hope you find this information helpful and wish the best for you and your family. Stay safe!
*Thanks to Tim Sundstrom, one of Dave’s speaking buddies, for writing this article!