Economic Impact Payments during 2020 Provided by the CARES Act

You’ve probably heard the IRS will be making millions of “economic impact payments” (also called “recovery rebates”) in the coming months to help people stay afloat during this time of economic uncertainty related to the COVID-19 crisis. Here’s what you need to know about this program:

Amount of Payment

IRS has begun making payments of up to $1,200 to eligible 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, a married couple with two children under 17 will get a $3,400 payment.

Who is Eligible

U.S. citizens and residents are eligible for full payment if their adjusted gross income (AGI) is under $75,000 for single or married filing separately, $112,500 for a head of household, and $150,000 for married couples filing jointly. 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.

Payments are Nontaxable

The economic impact payment that you receive won’t be included as income for tax purposes. It won’t cause you to owe tax or decrease your refund for 2020.

How to Get a Payment

The vast majority of people won’t have to do anything in order to get an economic impact payment. The IRS will calculate and send the payment automatically to those who are eligible.

The IRS will deposit the payment directly into the bank account reflected on the return. The IRS developed a web-based tool called Get My Payment, www.irs.gov/coronavirus/get-my-payment.  The tool does include a feature to check the status of your payment.

If you’ve already filed your 2019 tax return, the 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.

If you have not yet filed for 2019, the due date for 2019 individual income tax returns is July 15, 2020, or October 15 if an automatic extension of time is requested on Form 4868. The IRS encourages individuals who are required to file a return for 2019 to file as soon as possible, but no later than October 15.

Doing so will ensure the IRS has enough time to process and make all resulting economic impact payments before December 31. Don’t use the Non-Filers: Enter Payment Info Here tool on the IRS website, as this could slow down the processing of your tax return and your economic impact payment.

If You aren’t Required to File

If you receive social security, supplemental security income, social security disability income, railroad retirement, or veterans’ compensation and pension benefits, and you aren’t required to file a tax return, you don’t have to file to receive a payment. The IRS will generate an automatic payment using information from the Social Security Administration and the Department of Veterans Affairs. The payment will be made by direct deposit or paper check, in the same manner as the recipient’s regular benefits.

If you aren’t required to file a tax return and you don’t receive any of the above payments, you can register to receive an economic impact payment by providing information on the IRS’s web-based Non-Filers.

Non-filers, Dependent Children $500 Payment

Non-filers who have a dependent child under age 17 must register their dependents on the Non-Filers: Enter Payment Info Here tool to receive the additional payment of $500 per child. Non-filers who receive the economic impact payment before registering a dependent child can still get the additional $500 payment by filing a 2020 income tax return on which the dependent is listed.

The IRS has online free filing options for simple returns or low-income filers. The IRS continues to offer an online, easy-to-use, Free File tax return prep product for taxpayers with AGI of $69,000 or less, as well as a more complex Free File Fillable Forms option for taxpayers whose AGI exceeds $69,000. Free File is available through the extended due date of July 15, 2020, and through October 15, 2020, by filing an automatic extension Form 4868.

Please let us know if you have any questions about the economic impact of payments or any other COVID-19 issues.

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