The Coronavirus has infected our life in many ways. There’s the lack of physical freedom and for those of us less fortunate, anxiety surrounding our daily income. Everyone is thinking about the financial impact, and we wanted to break down a few things that you need to act on, and what you can ignore for the moment.
President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act, (CARES Act), a $2 trillion stimulus package to mitigate the impact of the Coronavirus pandemic.
The CARES Act includes stimulus payments of $1,200 for each individual and $500 for each dependent child, defined by the child tax credit rules as under age 17.
Individuals with adjusted gross income (AGI) up to $75,000 a year are eligible for the full $1,200 payment. The payment is reduced by $5 for every $100 in income above $75,000. The payment amount is entirely phased out at an AGI of $99,000.
Married filing joint couples with AGIs up to $150,000 a year are eligible for a $2,400 payment. The payment is reduced by $5 for every $100 in income above $150,000. The payment amount is entirely phased out at an AGI of $198,000 (if the taxpayers have no dependent children). Married couples also will receive an additional $500 for every dependent child under 17.
Keith and Norma are married filing joint. They have no dependent children. If they have AGI of $150,000 or less, they are eligible for a $2,400 payment. If they have AGI above $150,000, their rebate will be reduced and finally phased out at an AGI of $198,000.
Chris and Pat are married filing joint. They have two dependent children under age 17. If they have AGI of $150,000 or less, they are eligible for a $3,400 payment. If they have AGI above $150,000, their rebate will be reduced and finally phased out if their income hits the top of the threshold amount.
Head of household filers with AGIs up $112,500 a year are eligible for the full $1,200 payment and an additional payment of $500 for each dependent child under age 17. The payment is reduced by $5 for every $100 in income above $112,500. Head of household taxpayers will also receive an additional $500 per dependent child under age 17. With no eligible children, a head of household filer is phased out at AGI of $137,000. With one eligible dependent child, a head of household filer is entirely phased out of the rebate payment at AGI of $146,400.
Example. Head of Household‐ no children under 17. Heather has an 18‐year‐old high school senior living with her and qualifies as a head of household filer. If her AGI is $100,000, Heather’s payment is $1,200. Her dependent child does not qualify her for the additional $500 payment because the child is not under age 17. If Heather’s dependent child is under age 17, her payment is $1,700.
Phase out of the rebate. If your income is above the threshold amounts, a reduced payment will result. The reduced amount using your own income (AGI) can easily be calculated using the Washington Post calculator.
The IRS has not distinguished between taxpayers in the US and abroad. As long as you file a 1040 (resident return) you should be eligible for the rebate.
Nothing. The IRS will deposit the calculated amount directly into your bank account, using the AGI and the bank information on your 2019 tax return. If your 2019 return hasn’t been filed, the IRS will use the AGI and the bank information from your 2018 tax return. If there’s no bank information on the return, the IRS will mail a check.
The IRS says that a direct deposit should be in your bank account in about three weeks. Checks should start arriving in six to eight weeks.
Taxpayers living outside country will receive refund within 12 to 16 weeks.
What if I have never used my automatic deposit facility on my returns in the past for security reasons, will that delay the receipt of the rebate from the IRS? Is there something I should do to get my direct deposit facility set up?
The direct deposit route would be the fastest. In the absence of this, the IRS will use physical mail to the address on record. If you have not filed your 2019 return yet and you feel your income will be under the threshold for 2019, file your 2019 return ASAP and ensure that you provide us with your direct deposit details when we prepare your returns.
Technically the stimulus rebate is a 2020 refundable tax credit. The payment received in the next few weeks is an IRS advance. If you have less income in 2020 than in 2019 because of layoffs, reduced hours and closed businesses, and your rebate payment was reduced by the income threshold, you’ll receive a credit for the difference on your 2020 return. If for some reason, you receive too much of an advanced payment, you do not have to pay back the excess.
What if I have already filed my 2019 return and my income in 2019 exceeds the threshold for the rebate but 2018 did not, can I request the IRS to use my 2018 numbers?
If you have filed the 2019 return, it is most likely that the IRS will use the latest numbers from the 2019 return. However, when you file your 2020 return based on actual numbers for 2020, the rebate amount will still be on your 2020 return as a refundable tax credit. So in essence you will still get benefit for it, the benefit will be deferred to when you file your 2020 return. You simply may not receive the cash now in the next few weeks.
What is Ventura Pranas doing for us to enable us to make the decision on whether I should file 2019 returns now or later (on or before the July 15th 2020) to best optimize my ability to receive the rebate?
We are reviewing all our clients’ 2018 returns and evaluating AGIs that fell below the threshold. For those that do, and if you have not as yet filed your 2019 returns, we will reach out to you for your 2019 information to see if your income numbers exceed the thresholds. If they do, we might prepare your returns but ask that you defer filing until July 15th 2020. For those of you who are expecting large refunds, we might suggest that you file timely and access your refunds and defer availing the rebate until you file you 2020 returns as explained above.
Contact us if you have questions and stay safe.
