As we navigate our new “normal” during this time of social distancing, both the state and federal government have moved quickly with legislation intended to both battle COVID-19 and to infuse resources into our economy. These new laws impact all of us in one way or another whether we are hospitals, schools, big business, small business, employees, job seekers, or students. After much deliberation over the stimulus package in Washington over the past few weeks, President Trump recently signed into law the Coronavirus Aid, Relief, and Economic Security Act, (CARES Act), a $2 trillion bill to mitigate the economic impact of this pandemic.
Who will receive and payments?
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.
- 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.
When Will the Payments Arrive?
The IRS says that a direct deposit should be in your bank account in about three weeks (if your bank information is on file from your 2018 or 2019 return). Checks should start arriving in six to eight weeks.
How Does the Payout Impact My 2020 Tax Return?
The stimulus rebate is actually a 2020 refundable tax credit. 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.