The Coronavirus Aid, Relief and Economic Security (CARES) Act is now law.
What does that mean for you?
What should you do at this time?
On Friday afternoon the President signed the bill sent to him by Congress now called the CARES Act.
There are 2 main pieces that effect most Americans now:
- Expanded Unemployment Insurance – for up to four months anyone can obtain an additional $600 per week for up to four months. The expansion also includes those not usually covered by unemployment: self-employed, independent contractors and those with limited work history or newly hired. Additionally, unemployment benefits will be funded an additional 13 weeks after state funds have run out
- Recovery Rebate for individual taxpayers – this is the focus of the rest of this blog…
What does the Recovery Rebate mean for YOU the Individual Taxpayer?
The CARES Act will pay a refundable tax credit for individuals of $1,200 ($2,400 for joint filers) and $500 for each child. The rebate is phased out at $75,000 for singles, $112,500 for head of household and $150,000 for joint filers. See the chart from TaxFoundation.org for examples of the amounts and phase-out.
Therefore, a single person with $100,000 income and no children would not get a benefit and the same for $200,000 income married filing joint and no children.
This will be based on your 2019 Income Tax Return filed. If you have not filed your 2019 return yet, then it will be based on your 2018 Income Tax Return.
What should YOU do at this time?
If you have ALREADY FILED your 2019 Income Tax Return you do not have to do anything. The IRS will process your refundable tax credit based on that information.
If you have NOT FILED your 2019 Income Tax Return the refundable tax credit will be based on your 2018 Income Tax Return. You also have 2 choices to make right now:
- File your 2019 Return now if your income is LOWER than your
2018 income tax return and below the threshold limits to get or maximize your
- Delay filing your 2019 Return if your income is HIGHER than your 2018 income tax return and above the threshold limits to get or maximize your credit
If you have NOT FILED your 2018 OR 2019 Income Tax Return YOU MIGHT NOT GET the refundable advance tax credit. The other people excluded are those who are behind on child support payments. You will still be eligible to receive it when you file your 2020 Income Tax Return – or you can still file your 2018 or 2019 returns now. [I feel that it is always advisable that you file your tax return even when no tax is owed]
The IRS will be sending out the refundable tax credits to the taxpayers 2019 (or 2018) bank account of record from your tax return.
- You should make sure they have the correct bank account on file to deposit your refund. The easiest way to check is on your 2019 tax return.
- It is not clear how they will process the refunds for those that do not have a bank account on file. Currently the www.irs.gov/coronoavirus page says not to call the IRS, whereas, you can call 800-829-1040 to add your bank information – sort of a mixed message; you will probably have difficulty getting through.
- A postcard will be sent out to each household with more information on where your check is going and how to give the IRS your bank account info.
I look forward to helping you in any way possible to get your 2019 Income Tax Return completed.
Please contact me as necessary.