One of the provisions of the CARES Act signed into law last month that has received the most press is the economic impact payments. These payments, also referred to as stimulus checks or recovery rebates, are desperately needed by many individuals at this time and are estimated to eventually reach over 90% of taxpayers. But who, how much, and when? Here’s a rundown on these critical payments coming from the IRS.
First, it’s important to keep in mind that these payments are an advance on a refundable tax credit that will be applied on our 2020 tax returns, and are being initially estimated based on data from 2018 or 2019–whichever is the last tax return filed. What this means is that if your income on your last return was higher than the phase-out but is now lower and would ultimately qualify, you won’t receive a payment now but will ultimately receive it next year when your 2020 tax return is filed.
Interestingly, in the opposite case where last year’s income qualifies for an estimated payment now, but actual 2020 income ultimately pushes you above the phase-out, there is not a “clawback” feature. In other words, the estimated advance will not need to be repaid.
So, how much will your payment be?
The payments are calculated based on the following starting values:
- $1,200 for individuals, $2,400 for married couples
- Plus an additional $500 for each child under age 17 as of the end of 2020
These amounts phase out at $5 per each $100 of additional income (AGI) above the following amounts
- $150,000 for Married Filing Jointly
- $112,500 for Head of Household
- $75,000 for all other Filers (e.g., Single)
When will you receive your payment?
The intent is that these will be paid “as soon as possible”. As of the time of this writing, many taxpayers who had direct deposit information already on file have already received funds. The payments are being directed as follows:
- Social Security recipients will receive wherever they get their SS checks.
- Other taxpayers with direct deposit instructions on file for a 2018/2019 refund will receive into that account if it is still open.
- All others will be mailed to the last known address on file with the IRS.
What should you do with YOUR stimulus payment?
It cannot be overstated that so many individuals and families desperately need this assistance now. If not for a rent or mortgage payment then for food and other necessary household items. For others who have not lost income, these funds are certainly an opportunity to add to emergency reserves or give to a favorite local charity. In either case, it’s worth considering if there’s a way to spend or give back to our communities and local businesses– to indeed stimulate the economy—and also take care of our own needs.
As ever, I hope if you are reading this that you and your families are keeping well.
How can APC help?