The information below includes releases issued by BenderCPA during the COVID-19 pandemic. These posts include summaries of tax law changes and relief provisions granted by the IRS and state/local authorities that impact our clients. While we try to be as detailed as possible, we ask that clients contact their BenderCPA advisor with any questions before taking action based on a post to ensure your intended outcome is achieved.
This week, the IRS announced that it plans to start sending out the Economic Impact Payments authorized by the CARES Act (also known as “Recovery Checks”) beginning this week. This alert includes FAQs about the program based on what we know today.
Q: Who is eligible?
A: U.S. residents will receive the Economic Impact Payment of $1,200 per individual plus $500 per dependent claimed on a tax return if their Adjusted Gross Income (AGI) is up to:
· $75,000 for individuals
· $112,500 for head of household filers and
· $150,000 for married couples filing joint returns
Taxpayers will receive a reduced payment if their AGI is between:
· $75,000 and $99,000 if their filing status was single or married filing separately
· 112,500 and $136,500 for head of household
· $150,000 and $198,000 if their filing status was married filing jointly
The amount of the reduced payment will be based upon the taxpayers specific adjusted gross income. Taxpayers with income above these ranges are not eligible for a payment.
The IRS will use your 2018 or 2019 tax returns (whichever is most recently filed) to determine your AGI. With your 2020 return, you will calculate your maximum credit based on 2020 AGI and will receive an additional credit if your initial recovery check was too small. You will not owe any excess back if your recovery check was larger than your 2020 income allows.
Q: Where will the payment be sent?
A: If your 2018 or 2019 tax return included direct deposit bank information for your refund, that’s where the IRS will send the payment. If you did not provide bank information or did not have a refund, the IRS will mail the check via US Mail to your address of record with the IRS (typically the address on your last tax return).
Q: What if I don’t have direct deposit info on my return, my bank info has changed, or I have moved?
A: The IRS has setup a page on its website (https://www.irs.gov/coronavirus/get-my-payment) to allow you to provide your bank information if you did not have any on file. We strongly recommend anyone who did not have refunds in 2018 or 2019 to use this link to provide bank information. This will accelerate your recovery payment. IRS has indicated that mailing of paper checks could continue as late as September in some cases. Direct deposit payments are expected to be completed well before then.
If your bank information has changed, try updating on the IRS website (link above). We’re unsure at this time if you’re able to update your information if you haven’t already received your payment. If your payment is returned because an account is closed, it is our understanding that the IRS will send your payment by check in the mail.
If you plan to receive your check by mail and you have moved, you should contact the US Postal Service to ensure you have an active mail forwarding request in place so the IRS check will be forwarded to your new address.
Q: When will I get my payment?
A: No action is needed by you to initiate the recovery checks. IRS will automatically process the payments over the upcoming days and weeks. For security reasons, the IRS plans to mail a letter about the economic impact payment to the taxpayer’s last known address within 15 days after the payment is paid. The letter will provide information on how the payment was made and how to report any failure to receive the payment. If a taxpayer is unsure they’re receiving a legitimate letter, the IRS urges taxpayers to visit IRS.gov first to protect against scam artists. Regardless, taxpayers can use the IRS “Get My Payment” system to check on status of their payment.
Q: What If I did not file a 2018 or 2019 tax return?
A: If you have not filed a tax return for 2018 or 2019, but do have a requirement to file, the IRS has not clarified whether they will use 1099s, W-2s, etc. as reported to them to determine your eligibility. Our recommendation is you file 2018 and/or 2019 as soon as possible to ensure you get your benefit.
If you do not have a requirement to file a return, the IRS will automatically issue the resulting recovery check based on the income they have on-file. These taxpayers can use a separate portal on the IRS website (https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here) to provide bank information to accelerate the recovery payment. Among others, this includes those who have no income, as well as those whose income comes entirely from certain benefit programs, such as Supplemental Security Income benefits.
Q: I received an additional $500 in 2020 for my qualifying child. However, he just turned 17. Will I have to pay back the $500 next year when I file my 2020 tax return?
A: No, there is no provision in the law requiring repayment of an Economic Impact Payment. When you file next year, you can claim additional credits on your 2020 tax return if you are able to eligible for them, for example if your child is born in 2020. But you won’t be required to repay any Payment when filing your 2020 tax return even if your qualifying child turns 17 in 2020 or your adjusted gross income increases in 2020 above the thresholds listed above.
Q: I got a phone call from “the IRS” asking for my bank information. Is this legitimate?
A: NO. The IRS urges taxpayers to be on the lookout for scam artists trying to use the economic impact payments as cover for schemes to steal personal information and money. Remember, the IRS will not call you, text you, email you, or contact you on social media asking for personal or bank account information – even related to the economic impact payments. Also, watch out for emails with attachments or links claiming to have special information about economic impact payments or refunds. The only way the IRS will contact you is by US Mail to inform you when your payment has been made.