We hope that you are keeping yourself, your loved ones, and your community safe from COVID-19 (commonly referred to as the Coronavirus). Along with those paramount health concerns, you may be wondering about some of the recent tax changes meant to help everyone coping with the Coronavirus fallout. We want to update you on one of the tax-related provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Recovery rebates for individuals: To help individuals stay afloat during this time of economic uncertainty, the government will send up-to-$1,200 payments to eligible taxpayers and $2,400 for married couples filing joints returns. An additional $500 additional payment will be sent to taxpayers for each qualifying child dependent under age 17 (using the qualification rules under the Child Tax Credit).
Rebates are gradually phased out, between $75,000 to $99,000 (for singles or married filing separately), $112,500 to $146,500 (for head of household), and $150,000 to $198,000 (for married filing joint). All recipients who are under the phaseout threshold will receive the same amounts. Tax filers must have provided, on the relevant tax returns or other documents (see below), Social Security Numbers (SSNs) for each family member for whom a rebate is claimed. The rebates are not available to estates and trusts, or to individuals who themselves could be claimed as dependents.
The rebates will be paid out in the form of checks or direct deposits. Most individuals won’t have to take any action to receive a rebate, but some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment. Social Security recipients will automatically receive the stimulus payment without having to file a simple tax return. People who typically don’t file a tax return will need to file a simple tax return to receive the payment.
IRS will compute the rebate based on a taxpayer’s tax year 2019 return (or tax year 2018, if no 2019 return has yet to be filed). If no 2018 return has been filed, IRS will use information for 2019 provided in Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Social Security Equivalent Benefit Statement.
Rebates are payable whether or not tax is owed. Thus, individuals who had little or no income, such as those who filed returns simply to claim the refundable earned income credit or child tax credit, qualify for a rebate.
According to IRS, economic impact payments will be available throughout the rest of 2020.