On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. This $2 trillion emergency relief package is intended to assist individuals and businesses during the ongoing coronavirus pandemic and accompanying economic crisis. The Act is quite extensive, so we've summarized many of the major relief provisions here.
The legislation provides for:
Most individuals will receive a direct payment from the federal government. Technically a 2020 refundable income tax credit, the rebate amount will be calculated based on 2019 tax returns filed (2018 returns in cases where a 2019 return hasn't been filed) and sent automatically via check or direct deposit to qualifying individuals. To qualify for a payment, individuals generally must have a Social Security number and must not qualify as the dependent of another individual.
The amount of the recovery rebate is $1,200 ($2,400 if married filing a joint return) plus $500 for each qualifying child under age 17. Recovery rebates are phased out for those with adjusted gross income (AGI) exceeding $75,000 ($150,000 if married filing a joint return, $112,500 for those filing as head of household). For those with AGI exceeding the threshold amount, the allowable rebate is reduced by $5 for every $100 in income over the threshold. This is a great tool for calculating your allowable rebate: https://www.omnicalculator.com/finance/stimulus-payment.
If you are owed a rebate because you have a reduction in your 2020 income, you will be paid as part of your 2020 income tax return. If your 2019 (or in some cases 2018) income allows you to receive a payment, but your 2020 income exceeds the threshold amounts, you will not be required to repay.
While details are still being worked out, the IRS will be coordinating with other federal agencies to facilitate payment determination and distribution. The Federal government is working to make payments as soon as possible, but realistically it may take 4-8 weeks for payments to be processed. If you currently receive Social Security benefits, your payment will be made to the account where your Social Security benefits are paid. If you had your Federal tax refund direct deposited to a bank account on your last filed return, then this is where your payment will be made. All others will receive a check to their last known address. If you have had a change in address, you should file Form 8822 as soon as possible.
Signed into law roughly two weeks prior to the CARES Act, the Families First Coronavirus Response Act (FFCRA) also included relief provisions worth noting:
There is likely to be a steady stream of guidance forthcoming with details relating to many of these provisions, so stay tuned for more information. It’s also important to note that we suggest re-evaluating your 2020 estimated payments and income tax projections mid-year to account for how these provisions may impact your tax situation. We're here to help and to answer any questions you may have.
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