Recently, the U.S. government authorized the relief payments to eligible persons as a result of the COVID-19 pandemic. Eligible persons will receive a check for $1,200 ($2,400 if married), increased by $500 per qualified child. Not everyone is eligible and a number of questions have come up. This post is about these payments and some common questions.
Eligibility and Phase Out
Not everyone is eligible. Your eligibility is based on your most recently filed U.S. tax return. Your eligibility may be based on your 2018 return if you have not yet filed your 2019 return, which is not due until July 15, 2020.
An individual is eligible for this payment if he or she is:
- A U.S. citizen or a resident alien, subject to U.S. taxation on his or her worldwide income,
- not claimed as a dependent on another person’s U.S. tax return, and
- His or her adjusted gross income, as reported on the most recently filed U.S. tax return, is less than $75,000/$150,000/$112,500 (filing status: single/married filing joint/head of household).
The COVID-19 payment is reduced by $1 for every $20 of adjusted gross income above the applicable income threshold. Therefore, if your adjusted gross income is above $99,000 and you are single, the relief payment will be completely phased out. The upper limit of adjusted gross income before the relief payment completely phases out for married taxpayers is $198,000 and $136,500 if you file as head of household, in each case if you do not have children.
If your tax filing status is head of household or married, the phaseout depends on the number of qualifying children claimed. For each qualifying child, your adjusted gross income can increase by $10,000 before the payment will be completely phased-out.
~Novel Serialisation: Heavens Fire~
Treatment of this Payment
These relief payments are actually tax credits against your 2020 taxes that are being refunded to you in advance of filing your 2020 income tax return. So, this payment is not taxable income. In addition, the IRS has stated that these payments will not affect a person’s eligibility to claim federal assistance or benefits programs.
Even though this payment is an advanced refund, you should still receive your expected tax refund when you file your 2020 taxes.
No Repayment
Since eligibility is determined by your most recently filed tax return, a question that comes up is what happens if a person’s circumstances change in 2020? For instance, your 2020 income may exceed the applicable income threshold, a child is born in 2020, or an eligible child loses qualified status by turning 17. In these cases, the IRS (in FAQs on their website) states that you can claim additional credits on your 2020 tax return when you file it. But there is no repayment obligation, which is great for taxpayers that received this check!
Claiming the Payment
If you were not required to file a tax return in 2018 or 2019, you can claim your payment at IRS.gov. If you filed a 2018 or 2019 tax return, you do not need to take any action. The IRS has begun sending these payments via direct deposit or in the mail.
If you have not received the payment or have further questions, you should review the information on IRS.gov and talk to your personal account or tax adviser.
By Brett R. Cotler
