This week Congress passed and the President signed a COVID-19 relief bill known as the CARES Act. The bill is designed to help individuals and small businesses weather the COVID-19 crisis. There are a lot of provisions in the bill, including a direct rebate check to individuals. I will explore the recovery rebate in this post and will answer some pressing questions.
The rebate is a direct payment intended to assist low and middle-income individuals and families. The purpose of the rebate is to assist you in affording what you need during this public health crisis. The rebate you receive will not have to be paid back.
- How much will I receive? Taxpayers with an adjusted gross income (AGI) up to $75,000.00, or $150,000.00 for joint filers, will receive a payment of $1,200.00, or $2,400.00 for joint filers. The payment will be increased an additional $500 per child. Example. A married couple with 3 children would receive a payment of $3,900.00. This payment is reduced by $5 for every $100 over and above the AGI cut-offs listed above, and phases out completely for those with incomes above $99,000.00 or $198,000 for couples.
- How is the rebate received? The Bill requires the Internal Revenue Service (IRS) to deliver your rebate quickly. If you have filed a federal income tax return in 2018 or 2019, payment processing will be based on payment or address information already on file with the IRS. Electronic payments will be automatic to an account the payee authorized 2018 or later. Rebates will be delivered automatically by the IRS to most U.S. citizens who file individual federal income tax returns. If available, electronic deposit will be used in place of mailing a physical check.
- Who is not eligible for the rebate? You are not eligible for the rebate if your are a non-resident alien, can be claimed as a dependent on another individual's tax return, if you are an estate or trust.
- I did not file a tax return, do I still qualify for the rebate? Yes, you qualify even if you did not file for a tax return. However, the quickest way to receive the rebate will be to file your 2019 return. The bill requires the IRS to engage in a public campaign to alert all individuals of their eligibility for the rebate and how to receive it if they have not filed either a 2019 or 2018 tax return.
Are individuals with little to no income or those receiving federal benefits, such as SSI, eligible for a recovery rebate? Yes, there is no qualifying income requirement. Even individuals with $0 of income are eligible for a rebate so long as they are not the dependent of another taxpayer and have a work-eligible SSN.
I am a senior whose only income is Social Security or a veteran whose only income is a veterans' disability payment, am I eligible? Yes, as long as you are not the dependent of another taxpayer. Keep in mind that you should still file your 2019 return to ensure you receive the rebate as quickly as possible.
- What if I have a past due debt to a federal or state agency, or owe back taxes, will my rebate be reduced? No, the bill turns off nearly all administrative offsets that would ordinarily reduce tax refunds for individuals who have past tax debts, or who are behind on other payments to federal or state governments, including student loan payments. The only offset that will be enforced applies to those who have past due child support payments that have been reported to the Treasury Department by their State.
It is important to remember that the purpose of the rebate is to get money to you quickly. Having filed a 2018 or 2019 tax return is not a prerequisite to receiving the rebate, but filing will ensure that you receive the rebate as quickly as possible. If you made $0.00 in 2018 or 2019 you should still file the return to make sure the relief money gets to you as quickly as possible.
The CARES Act has many other provisions that benefit individuals and small businesses, I will continue to post on these provisions.