Note: The following guide was written with the best, most current information available as of April 7th, 2020. However, the situation is still in a state of flux. Treasury officials are still fine-tuning regulations and administrative requirements based on feedback from the field. Some information in this guide may have changed since it was first published.
The massive $2.2 trillion CARES Act, signed into law on March 27th, includes a direct cash payments, called Economic Impact Payments, to most American taxpayers, to be distributed as soon federal officials can figure out how.
The Act authorized a tax-free payment of up to $1,200 to every American worker or retiree with a Social Security Number, to include green card holders and permanent residents. The government will also pay $500 for each qualifying child in the household.
You can still qualify, even if you owe back taxes, or you have defaulted on a federal student loan.
The benefit does not have to be paid back.
For most American single filers who made less than $75,000 in 2019, the stimulus payment will be $1,200.
Married couples who earned less than $150,000 in 2019 will receive $2,400.
If you filed as a head of household and made $112,500 or less, you will receive $1,200.
You will receive an additional $500 for every qualified child in the household. A family of four, then, can receive up to $3,400.
Under the CARES Act, a qualifying child is one meeting all of the following criteria:
The payout is reduced by $5 for every $100 of income earned over the threshold. Payments phase out completely for individuals who earned $99,000 or more, or couples making $198,000 or more, with no qualified children. The payment phases out completely at $136,500 for heads of household.
There is no marriage penalty – the thresholds and phaseouts for married filers are precisely double those of single filers, other than heads of households.
According to Treasury Secretary Steven Mnuchin, the first coronavirus stimulus payments should be going out by about April 16th. Those will be going out via direct deposit to those who have already provided the IRS with their direct deposit information.
To get your payment as soon as possible, ensure you’ve filed a tax return for 2019 or 2018, with your direct deposit information included. The government can then issue your payment via direct deposit.
If the IRS does not have your direct deposit information on file, they will send a paper check. However, that process could take until May, according to some sources.
Most people don’t have to do anything, say Treasury officials. The majority of recipients have already filed a 2018 or 2019 tax return. The government will automatically calculate your benefit from those returns, and send your payment via direct deposit to the account specified on your returns.
If you have not filed a 2019 return, you can do it for free via the IRS Free File Program. If you haven’t already filed a 2018 or 2019 return, or the IRS doesn’t have your direct deposit information, you’ve moved, or you’ve gotten divorced since you last filed, using the IRS Free File program is the fastest and most reliable way to ensure you receive your coronavirus stimulus payment.
The Internal Revenue service is working on creating a Web portal that you can use to transmit your direct deposit information to them. It should be live in the coming weeks. Once they have your account information, they can send your coronavirus stimulus payment via ACH. It will still be faster than issuing a paper check – and much less expensive for the government.
Social Security recipients are eligible. They will not have to file a tax return to get this payment if they are not normally required to file, according to the IRS, in a policy reversal announced last week.
The IRS will use existing SSA-1099 and RRB-1099 forms to process payments. If a bank account is on file, these retirees will receive a direct deposit. Otherwise, the IRS will send a paper check – though at a later date.
“We want to ensure that our senior citizens, individuals with disabilities, and low-income Americans receive Economic Impact Payments quickly and without undue burden,” said Treasury Secretary Steven Mnuchin. “Social Security recipients who are not typically required to file a tax return need to take no action, and will receive their payment directly to their bank account.”
Note: that if you are a Social Security or Railroad Retirement beneficiary and not required to file taxes, and you have minor children as dependents or living with you, the IRS will have no way of knowing about these children. You would therefore not receive the additional payment of $500 per child – just the $1,200 payment for singles and widow(er)s or the $1,200 for married couples, assuming your income does not exceed the threshold for the maximum payment.
No. These payments do not count as taxable income. They will not contribute to, or trigger taxes on Social Security income, or cause any other negative tax consequence.
According to the Social Security Administration, Economic Impact Payments received will not cause a problem for Supplemental Security Income (SSI) recipients. The Social Security Administration will not count such payments as income. They will also not be counted as assets for one year.
This was a major concern among disabled individuals, their guardians and advocates. The fear was that if they received an Economic Impact Payment directly, it would count as income or an asset – and therefore render them ineligible for other means-tested government benefits such as food assistance or Medicaid.
The Social Security Administration has put these fears to rest. However, SSI recipients must spend down the money within a year, and get non-exempt, personally-owned assets below the state threshold, or the money received under the Economic Impact Payment program may count as a spendable asset and jeopardize access to benefits
If you have not filed a return for 2018 or 2019, but have a tax liability, the IRS encourages you to file as soon as possible, with your direct deposit information to receive your stimulus payment.
The IRS will not intercept your payment even if you owe back taxes, whether to state or federal governments.
I have delinquent student loans. Can I still receive the payment?
Yes. The IRS will not withhold your payment due to federal student loan default.
Some filers will have earned more than the income threshold as reflected in their 2018 or already-filed 2019 returns — but have since been furloughed or laid off. You may not be eligible for the benefit immediately. The Treasury Department is aware of the issue, and is working on addressing it.
Meanwhile, you may be able to apply for assistance under the Paycheck Protection Plan or an Economic Injury Disaster Loan. You may also qualify for expanded emergency unemployment benefits.
If you haven’t filed a 2018 or 2019 return yet, and you need time to prepare or to see a tax professional, you have until the end of the year before the stimulus payment will no longer be available.
The deadline to file and pay individual income taxes for tax year 2019 is extended to July 15th. Be sure to meet that deadline to avoid penalties for non-filing and interest for non-payment.
The IRS will either send a direct deposit to the bank account that you provided to them on your 2018 or 2019 tax return or via their soon-to-be-launched portal, or they will send you a paper check.
The IRS will not telephone you, email you or text you to verify your account details. If you get a call from someone claiming to be with the IRS or Department of the Treasury asking you to “verify” or “confirm” your Social Security number, account details, or any other similar information, it’s a scam.
If you receive an email or text from someone claiming to be with the IRS or Treasury, do not click on the links. The links may contain spoof websites or may contain computer viruses or malware designed to steal your information.
If you receive a check that contains instructions to call a number and verify accountant information or receipt, it’s a scammer at work. The check is fake.
If someone contacts you and claims you need to pay a processing fee, or pay any other fee up front in order to get your money, it’s a scam.
We understand the process can seem overwhelming. Most people don’t spend every day thinking about tax and financial documents and complying with innumerable federal administrative requirements.
Fortunately, at JFDI Accountants, we eat, sleep and breathe that stuff every day.
If you need assistance, please don’t hesitate to reach out to us at WeCare@JFDIAccountants.com.
Meanwhile, stay safe, respect the CDC guidelines, and look out for each other.
All the best, and good luck,
CEO, JFDI Accountants