TPC planning and Tax teams
On Friday, March 27th President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law.
This legislation is being billed as the largest aid and relief act in the history of the United States, and is designed to support individuals and businesses as we all weather this Coronavirus 19 (CV19) storm.
The main question we hear clients asking is “will I get a relief check to help with cash flow?” The following is a summary of the Recovery Rebate provisions within the CARES Act.
All Recovery Rebates (checks from the US Treasury) are considered a refundable tax credit for tax year 2020.
- This is effectively a credit on your 2020 tax bill.
The amount of checks to be paid, based on the eligibility below, will be:
- Individual Tax Filers- $1,200 one-time check
- Married Tax Filers- $2,400 one-time check; effectively $1,200 per spouse
- For those married tax filers in 2019 (or 2018) who have since divorced, the rebate will be paid in one payment and the spouses will have to split accordingly.
- Head of Household- $1,200 one-time check
- An amount of $500/child will be added for any children under 17 years old claimed on your tax returns.
The income limits for receiving a recovery rebate are as follows:
- Individual Tax Filers- rebates will be sent to individual taxpayers under $75,000 of AGI, with benefits to be phased out beyond that threshold.
- Married Tax Filers- rebates to be paid to joint taxpayers under $150,000 of AGI, with benefits to be phased out beyond that threshold.
- Head of Household Filers- rebates will be sent for those under $112,500 of AGI, with benefits to be phased out beyond that threshold.
- The amount of, or eligibility for, the Recovery Rebates will be phased out at a rate of $5 per $100 of income over the amounts above.
- This includes the $500/child amounts included in the rebate checks.
- Full phase-out income levels will depend on filing status and number of children.
The eligibility and amount for recipients is calculated using the 2019 Federal Tax return, or the 2018 Federal Tax return if 2019 is not yet filed (remember, the new filing deadline is July 15th, 2020 for all Federal returns).
- If you believe your 2019 return will show a lower income, or otherwise change your eligibility you may consider accelerating your filing date.
- There is no “drop dead” filing date specified in the legislation with respect to when the 2019 return would need to be filed.
If you were a high earner in 2019 (and/or 2018) but have experienced a loss of income in 2020 due to the current circumstances, your rebate will be applied when you file your 2020 return.
- In other words, you don’t lose the ability to participate, but the receipt of the funds will be delayed, and you won’t qualify for immediate relief.
If you had lower earnings in 2019 (and/or 2018), but you expect higher earnings in 2020 AND you receive a rebate check, you will not be forced to pay any portion of the rebate amount back.
Delivery of Relief Rebates are scheduled for “as soon as possible”, with no definitive date specified:
- Those receiving Social Security will get their rebate amount with either their April or May social security checks.
- All other amounts will be sent based on how you received your 2019 (or 2018) refund.
- Those with direct deposit on file will have the rebate amount deposited to the account of record.
- Those who received mailed refunds will have the rebate check mailed to the address of record.
- The IRS will send notices in the coming weeks detailing how the rebate was calculated, to where it was sent, and provide a phone number for those who did not receive their payment.
IF you have moved since filing your 2019 (or 2018) return, you can use IRS form 8822 to update your address with the IRS.
We’re living in volatile times, and we’re ready to work with you to find the right path forward with respect to your 2020 possible recovery rebate. Please contact us with any questions you may have!
The Planning Center is a fee-only financial planning and wealth management firm.
Email us at: clientservices@theplanningcenter.com.
