PRAIRIE VIEW, Texas (April 14, 2020) – The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted on March 27, 2020, includes the allocation of $2.2 trillion in support of individuals and businesses affected by the global coronavirus (COVID-19) pandemic and associated economic downturn. Prairie View A&M University’s B. Brian Lee, a professor of accounting in the College of Business who’s been providing tax help for the past 15 years, addresses some frequently asked questions concerning stimulus payments to individuals in CARES.
When is the new Tax Day this year?
The Internal Revenue Service (IRS) has extended the due date of the 2019 tax filing and payment from April 15, 2020, to July 15, 2020. Furthermore, individual taxpayers and businesses who need additional time beyond July 15, 2020, should file Form 4868 and Form 7004, respectively.
How much are the stimulus payments?
A single filer with a social security number will receive a tax-free coronavirus stimulus check for $1,200, while a married couple filing jointly will receive a $2,400 check. In addition, adults with qualifying children under 17 will receive an additional $500 per child.
What is the income limit to receive the maximum amount of $1,200 per person?
The $1,200 payment starts to phase out by $5 for every $100 when the adjusted gross income (AGI) of a single filer exceeds $75,000; a single parent exceeds $112,500, and a married couple filing jointly exceeds $150,000.
Who does not qualify for a stimulus check?
- Nonresident aliens without a social security number.
- Taxpayers with a high AGI. For example, single filers with an AGI above $99,000, single parents with an AGI above $136,500, and married couples filing jointly with no children and an AGI above $198,000.
- Dependent children who are 17 or 18 years old do not qualify for the $500 payment.
- College students ages 19 to 23 who are claimed as dependents on their parents’ tax returns do not qualify for either individual or child payments.
How does one receive a stimulus check?
The IRS determines the payment amount based on the 2019 tax return (or the 2018 tax return if the 2019 tax return has not yet been filed) and issues a stimulus check via direct deposit when that information is available. The IRS is scheduled to begin direct deposit payments from the week of April 13 and mail paper checks to the last known address of a taxpayer in early May. A taxpayer may need to wait several months to receive a paper check. If an address has been changed, a taxpayer may need to file a change of address form (Form 8822) with the IRS. Meanwhile, the IRS has been advised to set up an online portal where taxpayers can submit their bank information to receive direct deposit payments instead of paper checks.
What is the timetable for the stimulus checks?
According to the Washington Post, taxpayers with the lowest income will receive stimulus payments first, as shown in the timetable below:
- Taxpayers with income of up to $10,000: April 24
- Taxpayers with income of up to $20,000: May 1
- Taxpayers with income of up to $30,000: May 8
- Taxpayers with income of up to $40,000: May 15
The remaining checks will be issued in income increments of $10,000 each week. For example, a married couple filing jointly with an income of $198,000 is scheduled to receive the check on September 11.
What if a taxpayer did not file a tax return in 2018 or 2019?
Social security recipients and railroad retirees will receive stimulus payments based on information in their benefit statements. Otherwise, they may need to file their 2019 tax return quickly with direct deposit information to receive a stimulus check on a timely basis. Alternatively, non-filers who meet certain conditions can provide payment information to receive the stimulus payment in the IRS online portal.
What if a taxpayer owes money to the IRS?
Taxpayers will receive a stimulus check even though they have outstanding tax liabilities, except for past-due child support obligations in which the stimulus check will be redirected to the entitled custodial parent.
What if the amount of a stimulus payment based on AGI in either 2018 or 2019 is incorrect?
The stimulus payment is a tax refund, which is supposed to be computed based on AGI in 2020. Since the 2020 AGI is not available, the IRS estimates the 2020 tax credit based on AGI in either 2018 or 2019. Accordingly, an estimated amount may be wrong. Suppose that a taxpayer with a high AGI in either 2018 or 2019 who was not eligible for a stimulus check experiences a reduced AGI in 2020 because of unemployment. They could claim the amount of stimulus payment that was missed in the prior year on their 2020 tax return. However, if the amount of the stimulus payment computed based on the 2020 AGI is less than the amount that a taxpayer received, they would not have to return it.
B. Brian Lee, Ph.D., CPA
Do stimulus payments affect the eligibility for financial aid from other social programs?
Stimulus checks are tax refunds, which are not taxable income to recipients. Accordingly, stimulus payments are considered as income in the course of determining eligibility for federal programs.
Additional information about stimulus checks is available at https://info.law.tamu.edu/cares-act-webinar-series.
Brian Lee, Ph.D., CPA, is a Professor of Accounting in Prairie View A&M University’s College of Business.