Congress is ready to approve an economic relief plan that includes one-time direct payments to families. Here is what it means for you:
Each adult is going to receive $1,200 and each family will receive $500 for each child under age 17. Adults will also receive the payments for the children in their household. Most people will receive the money in a payment from the IRS soon.
The payments will go to almost all adults with a Social Security number. Adults who are claimed as dependents will not receive the payment.
The payments will start phasing out for single individuals with adjusted gross income above $75,000; and those filing as head of household with adjusted gross income above $112,500; and for married couples filing jointly it will start phasing out for couples with adjusted gross income above $150,000. For those with no children the payments are totally phased out for single individual with adjusted gross income of $99,000 and $198,000 for couples filing jointly.
The IRS could start issuing payments within three weeks, although they have not yet announced a schedule. The payments will be faster for people who have filed their 2019 tax returns with direct deposit information.
The government will use 2019 tax returns to set the payment amounts and 2018 tax returns if 2019 is not available. People who have not filed their 2019 tax returns can still file to make sure the government has their updated income and bank account information, as well as recent births, deaths, marriages, divorces and moves.
The final amounts will be based on 2020 income and will be settled on 2020 income tax returns. People who are not eligible because their 2018/2019 income is too high and have lower income in 2020, which makes them eligible for the payment (or a higher payment), will receive the benefit when they file their 2020 tax return.
There is good news for people who owe back taxes to the IRS. The IRS will not reduce the payments to cover other amounts owed to the IRS, even if you owe back taxes.
If you have questions, your REA contact is awaiting your call or contact Monica Hayman, CPA at firstname.lastname@example.org. In the meantime, we’ll keep our COVID-19 business insights here.
Monica Hayman, CPA, Tax Accountant