Most people will not need to do anything to receive the “Economic Impact Payment to Taxpayers.” The IRS is scheduled to send out a one-time payment beginning later this month to individuals and families to help replace lost wages in the short term.
Individuals whose adjusted gross income does not exceed $75,000 will receive $1,200. Married couples filing a joint tax return will receive $2,400 when their adjusted gross income does not exceed $150,000. An additional $500 benefit will be sent for each qualified child. There is a gradual reduction in the benefit if your adjusted gross income exceeds the limits. For every $1,000 over the limit, the benefit is reduced by $50. The payments are phased out entirely at an adjusted gross income of $99,000 for individuals and $198,000 for couples. Also, there is no payment to someone who is claimed as a dependent on another’s return. This usually applies to young people who are working and claimed on their parent’s tax return as a dependent.
The IRS will use your 2019 tax return to determine eligibility if you have already filed this year. On your tax return, the adjusted gross income is on line 8b on the first page. If you have not yet filed for 2019, then the IRS will use your 2018 tax return. For 2018 your adjusted gross income is on line 7 on the first page. Those receiving social security benefits or railroad retirement will get this relief payment even if they do not file a tax return.
The IRS will use the bank account on your tax return where tax refunds are deposited or the account where your social security benefit is deposited. If the IRS does not have a bank account for you, the check will be mailed to your last known address. No schedule has been released yet, but it is likely that the first checks will go to taxpayers who have filed a 2019 tax return with direct deposit information. That is an incentive to file your 2019 return soon even though there is an extension to file for 2019 until July 15.
A confusing part of the bill is the “true up” for 2020. There may be some taxpayers who do not qualify based on 2018 or 2019, but because of layoffs right now, they will qualify in 2020. The benefit is sent based on 2018 or 2019 income data because that is all the IRS has. If the 2020 tax return filed in 2021 shows a taxpayer deserved a payment they did not receive, they will get it in 2021. Unfortunately, that will not help them now when they need it. They will need to use other parts of the CARES Act such as unemployment benefits to get relief now. The good news is if a taxpayer qualifies based on the 2020 tax return the check will eventually be sent. If the 2020 tax return shows the taxpayer did not suffer a decline in income but did receive a check, there is no provision to take back the benefit paid based on 2018/2019.
These benefits are available throughout 2020 so if you need to file a tax return for 2018 or 2019, do it as soon as possible. The IRS will post information and updates at IRS.gov/coronavirus. There is a web portal planned where people can check on their benefit and send updated information to the IRS such as a bank account or current address. When it is available it will be posted at IRS.gov/coronavirus. Be very careful to avoid scams regarding these payments. Be safe and don’t give out your banking account information in any email or text or phone call. The IRS will never ask you for banking information liked that.
This information is based on information available as of April 7, 2020. We believe it to be accurate, but you should check IRS.gov/coronavirus for the latest information.
Written by Connie C. Guelich, CFP, AEP, CLU, ChFC. This represents our view at the time of this writing and is subject to change. This is not intended to be personal investment advice. If you would like to discuss your own account, please don’t hesitate to call us. We are here to help and welcome your call.