Coronavirus (COVID-19) is affecting every person, from the economy, to business, health and social practices. Tax season is also affected with filing and payment deadlines being delayed federally and in many states. The federal government has authorized monetary help in the form of the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that was signed into law March 27. Let’s look at what the CARES Act means for taxpayers.
Individual taxpayers with adjusted gross income up to $75,000, or up to $150,000 for married couples filing joint returns, will receive the full payment of $1,200 per person, or $2,400 for married couples. Parents will also receive $500 for each qualifying child.
For filers with income above those amounts, the payment amount is reduced. Individuals with income more than $99,000, or $198,000 for joint filers with no children, are not eligible for monetary relief. In addition to income levels, eligible individuals must be a U.S. citizen, permanent resident or qualifying resident alien. You cannot be claimed as a dependent on someone else’s return, and you must have a valid Social Security number (SSN).
The Internal Revenue Service (IRS) will base your eligibility and payment information off your 2018 or 2019 tax return. If you have not yet filed a 2019 tax return, the IRS will use your 2018 to determine payment. Additionally, if you owe money to the IRS, the amount will not be deducted from your debt. The only exception to this if you owe past-due child support.
The economic relief payments are not considered income, which means you will not have to pay tax on the amount you receive on your 2020 tax return. It will also not reduce your refund of increase the amount you owe when you file your 2020 tax return next year. Receiving payment will also not affect your income when determining eligibility for federal government assistance or benefit programs.
If you did not file taxes in 2018 or 2019, or if your gross income was under $12,200 ($24,400 for married couples, you may still be eligible for economic relief. You will need to use the “Non-Filers” application to provide simple information so you can get your payment.
The IRS is issuing payments based on the bank account information that was included on your last tax return. If you need to enter bank account information, or want to verify what the IRS has one file for you, go to the Get My Payment webpage and enter the appropriate information.
If you’re not sure what COIVD-19 means for you as a taxpayer or business owner, consult an experienced tax professional for help. We are living in unprecedented times. It’s best to seek help from a tax expert than try to navigate federal and state taxes alone.
Allison Soares is a partner and tax attorney at Vanst Law. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing tax problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving the IRS and state tax problems.