One of the provisions of the newly signed CARE Act eagerly awaited by many Americans is the part of the law that provides Coronavirus stimulus checks. Here are the details.
The stimulus checks actually stem from a new tax credit on your 2020 income tax returns that will be filed in 2021. The credit provides for a tax credit in the following amounts:
- Married Filing Joint taxpayer: $2,400
- Everyone else: $1,200
- You will also get $500 for each “eligible child”. An eligible child is a child you claimed as a dependent and is under the age of 17.
However, instead of waiting until next year to get money in your hands, Congress is providing Advance Refunds, more affectionately known as Coronavirus Stimulus Checks. The amount of the checks will be based on your 2019 tax return. If you did not file a 2019 tax return yet, it will be based on your 2018 tax return. If you filed neither because you were not required to file but you received social security benefits or railroad retirement benefits, you will still get a check. If none of these applied, we assume you will need to wait until you file your 2020 tax return next year.
The eligibility is also income based. You will get a check in the full amount if any of these apply to you:
- You filed married filing jointly and your adjusted gross income is under $150,000
- You filed single or married filing separately and your income was under $75,000
- You filed head of household and your income was under $112,500
If your income exceeds these amounts, you will receive less or no stimulus check. However, if your 2020 tax return is filed and the calculation shows you should have received more based on your adjusted gross income in 2020, you will receive the difference when you file your 2020 tax return next year. You can see that there could be some nice tax planning opportunities later in the year if you are “on the bubble”.
There are a LOT of details and questions to be ironed out. For example:
We understand that if you received your 2018 or 2019 refund as a direct deposit, the IRS will deliver your stimulus check to the same bank. What happens if you closed that account? We will await IRS guidance but we would guess the a check will be issued at a later (probably much later) date.
Also, if you get a stimulus check based on your 2018 or 2019 return and when you file your 2020 return, it shows you should not have received a check (that of course assumes you were fortunate and your income increased this year – what a great problem to have!). We believe there will not be a requirement to return any portion of the stimulus check.
As with any new legislation, this has to be interpreted by IRS regulations and implemented by the IRS. We will continue to update this post as we get new information. If you would like a good summary of all of the provisions, check out this article by The Tax Foundation.