Congress 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.
Who and How Much?
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.
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.
Phaseout 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.
How will the IRS know where to send my payment?
The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.
For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The economic impact payment will be deposited directly into the same banking account reflected on the return filed.
When Will the Payments Arrive?
The IRS says that a direct deposit should be in your bank account in about three weeks.
The IRS does not have my direct deposit information. What can I do?
In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.
2020 Tax Return
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.
Contact us if you have questions and stay safe.
Jessica Franz Online Bookkeeping Inc. Online Tax, LLC