Our office is getting many questions regarding the rebate payments ("economic impact payments" also called "recovery rebates") that were authorized as part of the CARES Act, signed into law on Friday, 3/27/2020 and in response to the economic uncertainty related to the COVID-19 crisis. Here’s what you need to know about this program.
Amount of payment. Eligible taxpayers will receive from the IRS payments of up to $1,200 for single taxpayers or up to $2,400 to married couples filing joint returns. Parents will get an additional $500 for each dependent child under age 17. Thus, the payment for a married couple with two children under 17 will be $3,400.
Who is eligible. U.S. citizens and residents are eligible for a full payment if their adjusted gross income (AGI) is under $75,000 (singles or marrieds filing separately), $122,500 (heads of household), and $150,000 (joint filers). The individual must not be the dependent of another taxpayer and must have a social security number that authorizes employment in the U.S.
Phaseout based on income. For individuals whose AGI exceeds the above thresholds, the payment amount is phased out at the rate of $5 for each $100 of income. Thus, the payment is completely phased out for single filers with AGI over $99,000 and for joint filers with no children with AGI over $198,000. For a married couple with two children, the payment will be completely phased out if their AGI exceeds $218,000.
How to get a payment. The vast majority of people won’t have to do anything in order to get an economic impact payment. IRS will calculate and send the payment automatically to those who are eligible.
If you’ve already filed your 2019 tax return, IRS will use the AGI and dependents from that return to calculate the payment amount. If you haven’t filed for 2019 yet, information from your 2018 return will be used.
IRS will deposit the payment directly into the bank account reflected on the return. IRS plans to develop a web-based portal for individuals to provide banking information to IRS, so that payments can be received as a direct deposit rather than by check sent in the mail.
The IRS has indicated that people who are not otherwise required to file a tax return will need to file a simple return to receive an economic impact payment. The CARES Act did not require this, so further clarification is needed for this point. The IRS will soon provide instructions about a simple tax filing, if required, and how to do this. Edit: As of late 4/1/2020, IRS announced that they will use information from SSA-1099 or Form RRB-1099 to generate payments to those that aren't typically required to file a tax return. (see IRS Economic Impact Payments website)
Payments nontaxable. Economic impact payments will not be included in the recipient’s income for tax purposes.
Payment Offsets These payments will not be affected by past due taxes, student loans or other debts. The only payment offset will be for child support, if the taxpayer is behind on those payments.
2020 Tax Return Impact. Taxpayers that are ineligible to receive the payment due to income on 2018 or 2019 tax returns, may still qualify for this rebate at the time of filing their 2020 tax return if their income falls below the phaseout amounts. Also, taxpayers that have a child in 2020 should be eligible for the additional child amount ($500) on their 2020 tax return. If the 2020 income is above the phase out, the rebate amount received is not required to be repaid.
CAUTION: Do not respond to phone calls, texts or emails from "IRS" about these payments. The IRS will not attempt to get personal information in those formats, but scammers will.
Please let our office know if you have any questions about the economic impact payments or any other COVID-19 issues.
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