Republican staff on the Senate Finance Committee working in the office of chairman Chuck Grassley, R-Iowa, have released a set of answers to frequently asked questions about the stimulus payments that are expected to give taxpayers at least $1,200 to deal with the economic fallout of the COVID-19 pandemic.
The FAQ page serves as unofficial guidance, but doesn’t necessarily replace official guidance from the Internal Revenue Service or the Treasury Department. The massive $2.2 trillion stimulus package was passed Friday by a voice vote in the House.
The CARES ACT Recovery Check FAQ explains eligibility for the recovery rebates or recovery checks, saying that “all U.S. residents with adjusted gross income under $75,000 ($112,500 for head of household and $150,000 married), who are not the dependent of another taxpayer and have a work-eligible Social Security Number, are eligible for the full $1,200 ($2,400 married) rebate. They are also eligible for an additional $500 per child. A typical family of four is eligible for a $3,400 recovery rebate.”
For taxpayers with adjusted gross income over $75,000 ($112,500 for head of household and $150,000 married), the rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children. For a typical family of four, the amount is completely phased out for those with adjusted gross incomes exceeding $218,000.
If a taxpayer’s income was above the threshold in 2019, but the taxpayer has lost their job due to the coronavirus, they can still get a rebate check. If their income last year was in the phase-out range, they would still receive a partial rebate based on their 2019 tax return. However, the rebate is actually an advance on a tax credit that can be claimed on their 2020 tax return. If their income is lower in 2020 than in 2019, any additional credit they are eligible for will be refunded or reduce your tax liability when you file your 2020 tax return next year.
The rebate isn’t taxable and is treated like other refundable tax credits, such as the Child Tax Credit and the Earned Income Tax Credit, and not considered income. Moreover, if the credit amount you qualify based on 2020 income is less than what you qualify for based on your 2019 tax return, it does not have to be paid back.
As for who qualifies as a child for purposes of the rebate, any child who is a qualifying child for the purposes of the Child Tax Credit is also considered to be a qualifying child for the purposes of the recovery rebate. Generally speaking, a child is any dependent of a taxpayer under the age of 17.
However, college students are only eligible for a recovery rebate if they aren’t considered a dependent of their parents. Generally, a full-time college student under the age of 24 is considered a dependent if their parent or parents provide more than half of their child’s support
As for whether dependents, aside from children under 17, qualify as a taxpayer for an additional $500 per dependent, the answer is no. The extra $500 per child is limited to children under 17.
As for whether individuals with little to no income or those on means-tested federal benefits, such as Supplemental Security Income, are eligible for a recovery rebate, the answer is yes. There’s no qualifying income requirement. Even individuals with zero income are eligible for a rebate as long as they aren’t the dependent of another taxpayer and have a work-eligible Social Security Number.
Similarly, seniors whose only income comes from Social Security and veterans whose only income is a veterans’ disability payment are eligible, as long as they aren’t the dependent of another taxpayer.
Most taxpayers will receive a rebate check, but they are likely to get it faster if they have filed either a 2018 or 2019 tax return, and if the IRS has their bank accounts on file where the money can be directly deposited.
“For the vast majority of Americans, no action on their part will be required to receive a rebate check since the IRS will use a taxpayer’s 2019 tax return if filed or their 2018 return if they haven’t filed their 2019 return,” said the FAQ. “This includes many individuals with very low income who file a tax return despite not owing any tax in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit.”
For those who haven’t yet filed a tax return for 2019 or 2018, the advice is the best way to ensure they receive a recovery rebate is to file a 2019 tax return if they have not already done so. The bill also requires the IRS to conduct a public campaign to alert all individuals of their eligibility for the rebate and how to receive it if they haven’t filed either a 2019 or 2018 tax return.
More answers to questions can be found here.