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“Show Me the Money” – FAQs for the Stimulus Payments

| April 01, 2020
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In response to the coronavirus (COVID-19) pandemic, Congress passed The Coronavirus Aid Relief and Economic Security (CARES) Act. The CARES Act has many provisions from small business relief to changes in IRA distributions to unemployment assistance.

The most common questions I’ve received from clients relate to the payments to individuals. That’s what I’ll focus on here. Please see my other blogs for additional information.

The CARES Act calls these payments “recovery rebates.” The IRS sites calls them “Economic Impact Payments.” Generally, people have referred to these as “stimulus payments” so I will also use that language. All these names may be suspect because we will simply have to wait and see if these payments provide any recovery, impact, or stimulus.

Keep in mind that many changes are happening while government agencies and even Congress itself are working in a disrupted environment. So, many clarifications will likely be coming out in the future.

 

  1. How much are the stimulus payments and who is eligible?
  • The CARES Act provides stimulus payments of up to $1,200 for each individual and $500 for each child (under age 17).
  • Individuals with adjusted gross incomes up to $75,000 (or $150,000 for married filing jointly) are eligible for the full amount. The stimulus payment starts to phase out at an AGI of $99,000 (MFJ $198,000).
  • It is not available to those without a SSN, nonresident aliens, or adult dependents.
  • College students will not receive a stimulus payment if they are claimed as dependents on their parent’s tax return.

 

Example: A married couple reporting a combined income of $125,000 with a 12-year old child and a 20-year college student who is a dependent would receive a payment of $2,900.

  

  1. How will the IRS know where to send my payment?

The IRS will deposit the stimulus payment directly into your bank account if bank information was provided on your 2019 tax return (or 2018’s tax return if 2019 has not been filed yet).  If no bank information is on file, a check will be mailed.

 

In the coming weeks, the IRS plans to develop an online portal for individuals to supply their bank information so they can receive the payments electronically as opposed to having a check mailed.

 

  1. When will the stimulus payments be made?

As of March 31, 2020, the IRS has not provided the exact date payments will be made but has said they will “begin in the next three weeks.” Direct deposits to bank accounts will arrive more quickly than checks to be mailed.

 

  1. Do I only get the payment if I am laid off from my job or have another hardship due to COVD-19?

No. Anyone who meets the eligibility described in question #1 receives the payment. Unemployment assistance is separate. You do not have to show any loss or hardship to receive the payment.

  

  1. Why is it referred to as a recovery rebate?

The stimulus payment is actually a rebate for a 2020 refundable tax credit, meaning it is an IRS advance.  These advances will not have to be paid back with your 2020 return.

The stimulus payment is not taxable.

 

  1. Can I still receive my payment if I am not required to file a tax return?

Social Security recipients who are otherwise not required to file a tax return do not need to file a return.  The IRS will use the information on the Form SSA-1099 to generate the stimulus payments and will send the payment as a direct deposit or by paper check, just as recipients would normally receive their Social Security benefits.

 

Other individuals who don’t have enough income to file a tax return (and don’t receive Social Security) will be eligible to receive a stimulus payment. However, some conflicting guidance remains if you should file something. At the time of this writing, the IRS says on its website that some “simple form” may be required to be filed to verify name and banking information.

 

  1. How long is the stimulus payment available if I haven’t filed a 2018 or 2019 tax return?

The IRS hasn’t provided a cutoff date they will use to send the stimulus payments.  If the date of enactment is used (March 27, 2020) and you have not filed your 2018 or 2019 taxes as of that date, you can still receive the stimulus as a refundable credit on your 2020 tax return.

 

  1. Will past due student loan debt affect the stimulus payment?

The stimulus payment will not be reduced by past due student loan debt

 

  1. Does someone who has died qualify for a stimulus payment?

No, anyone who deceased does not qualify.  A payment made to someone who has died before they received the stimulus payment should be returned to the IRS.  Return the decedent’s entire payment (not including a spouse’s payment if applicable), which will be $1,200. The $1,200 amount could be reduced if the deceased’s adjusted gross income exceeded $75,000 ($150,000 married filing jointly).

 

The IRS has provided the below instructions on how to return a payment.

 

If the decedent received a paper check, then…

 

  1. Write “Void” in the endorsement section on the back of the check.
  2. Mail the voided Treasury check immediately to the appropriate IRS location listed below.
  3. Don’t staple, bend, or paper clip the check.
  4. Include a note stating the reason for returning the check.

 

If the payment was a paper check and you have cashed it, or if the payment was a direct deposit, then…

 

  1. Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below.
  2. Write on the check/money order made payable to “U.S. Treasury” and write 2020EIP, and the taxpayer identification number (social security number, or individual taxpayer identification number) of the recipient of the check.
  3. Include a brief explanation of the reason for returning the EIP.

 

IRS Mailing addresses

 

If you live in Kentucky, mail to Atlanta Refund Inquiry Unit, 4800 Buford Hwy, Mail Stop 112, Chamblee, GA 30341.

 

If you live in Illinois, mail to Philadelphia Refund Inquiry Unit, 2970 Market St, DP 3-L08-151, Philadelphia, PA 19104

 

For additional states, check the IRS Economic Impact Payment Information Center: More About the Economic Impact Payment: What should I do to return an Economic Impact Payment (EIP)?

 

The IRS has said it will update all key information as it becomes available at IRS.gov/coronavirus. The information above is obtained from sources believed to be reliable. If your particular situation is not covered by the above, then please contact us.

 

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