Individual Economic Impact Payments Under the CARES Act
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law by President Trump after having been unanimously approved by the Senate. The act provides approximately $2 trillion in assistance to individuals, businesses and the health care systems in an effort to relieve financial burdens caused by COVID-19. A recovery rebate for individual taxpayers provided under Title II of the act is the subject of this article.
The CARES Act provides a refundable tax credit of up to $1,200 to individual tax payers, or up to $2,400 for taxpayers filing jointly. Taxpayers with children under the age of 17 will receive an additional $500 per child. While the rebate for taxpayers is adjusted based on income, the tax credit provided for children is a fixed amount independent of income level. The credit is exclusive to children and does not include other dependents.
Income for the 2019 tax year will be used to determine the amount of credit provided. If a tax return was not filed in 2019, the 2018 tax year will be considered. For individuals without a 2018 filing, Social Security benefit information for 2019 will be used. The rebate will be reduced by 5% per dollar, or by $5 per $100, that exceeds gross income amounts of $75,000 for individuals, $112,000 for heads of households, and $150,000 for joint tax filers. Taxpayers with no children earning $99,000 individually or $198,000 jointly are not eligible to receive a rebate. However, taxpayers ineligible based on their 2019 tax return, but whose 2020 income would make them eligible for a rebate, can claim the difference as a tax credit during the 2020 tax season.
Most people do not need to do anything to receive their rebates. The IRS will calculate the amount and send the payment directly to taxpayers. For taxpayers that use direct deposit for their tax returns, the rebate will be automatically deposited to the bank account listed on their return. Otherwise, the payment will be sent as a check in the mail. A web-based portal is also under development that would allow individuals to provide their bank account information to the IRS.
Individuals that typically do not file a tax return, such as low-income taxpayers, senior citizens, Social Security recipients, or some veterans and individuals with disabilities, still may receive a rebate by filing a 2019 tax return. Those that have yet to complete their 2018 or 2019 tax filing obligations also may receive a rebate after filing their return. However, the rebate is only available through December 31, 2020.
Individuals can expect to receive their rebate within the next three weeks. The IRS will continue to provide updated information concerning the CARES Act recovery rebates, referred to as “economic impact payments,” at irs.gov/coronavirus.
Should you have any questions regarding these rebates, please contact one of our business attorneys.
Anna L. Crisp, a law clerk with Eastman & Smith who is finishing her third year at The Ohio State University Moritz College of Law, contributed to this article.
At the date of publication the above information was correct. It is quite possible the information above has changed as COVID-19 is a rapidly evolving situation.
The article in this publication has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.