On Friday, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a mammoth $2 trillion bill that may end up costing up to $6 trillion. Over the next few days, we will be summarizing the provisions of the law most likely to impact our clients.
Today we begin with the Recovery Rebate checks and payments that will be going out to individuals and families over the next month.
CARES Act Recovery Rebate Highlights
All U.S. residents or citizens are eligible to receive a payment of $1,200, or $2,400 per married couple, plus $500 per child under the age of 17 (as of 12/31/2020). A family of four, therefore, is eligible for a $3,400 recovery rebate.
- Income phase-out thresholds will apply. The phase-out thresholds are as follows: individual taxpayers with adjusted gross income over $75,000, $112,500 for head of household filers, and $150,000 for married couples. Once that income threshold is reached, the benefit is reduced by $5 for each $100 of income above that threshold.
- For purposes of determining the amount of this initial payment, income will be determined based on taxpayers’ 2019 tax return, or 2018 tax return if the 2019 tax return has not been filed.
- However, the rebate will be treated an advance on a tax credit to be claimed on the 2020 tax return. If the taxpayer does not qualify for the payment based on their 2019 tax return (or received a reduced benefit) but does qualify for a full or increased benefit based on their 2020 return, they will receive the credit when filing their 2020 tax return. However, if the taxpayer qualifies for the credit based on their 2019 tax return, but not their 2020 tax return, they will not be required to pay the rebate back.
- If the IRS has bank deposit information on file from either the 2018 or 2019 tax return, the rebates will be delivered via direct deposit. If not, a manual check will be issued to the most recent address the IRS has on file. Social security recipients will receive their check along with their social security check.
There does not seem to be any information available on the IRS.gov website as of right now. However, here is a congressional website that you can reference for more information: https://www.grassley.senate.gov/news/news-releases/cares-act-recovery-check-faq
As we get more information, both official and anecdotal, we will let you know.