The IRS has told congress that it will begin issuing coronavirus economic disaster stimulus payments to families as early as this week. However, those expecting these funds by mail may have to wait until September to receive them.
This article clarifies some tax issues that are bothering our clients and the wider public, especially now that getting through to the IRS by phone has become near impossible.
As you read along, if you discover that you are not well-prepared to receive your stimulus funds early, or that the free resources proposed will be unattainable or unreliable for you, get assistance through our remote service page.
Use coupon code ARCHER40 to get a 40% discount before April 15, 2020.
On March 27, 2020 the President signed a $2.2 trillion stimulus package—known as CARES Act, H.R. 748—into law. The Treasury Department, Small Business Administration (SBA), Internal Revenue Service (IRS), and Federal Reserve are the agencies that will have the most substantial role in implementing the legislation.
Private lenders (banks, credit unions, etc.), particularly SBA lenders, have a major role too. How well and justly they perform their tasks will largely determine the economic fate of the United States over the next few months. We have already seen a chaotic start to the business aid packages that were due last week.
What matters most now is your accurate knowledge of the benefits you are due, and your individual diligence to ensure that you do not needlessly delay or complicate your stimulus funds delivery.
CARES ACT: THE FACTS
- All U.S. residents (including foreigner nationals) with a valid Social Security number (SSN), are eligible for a $1,200 rebate ($2,400 for married couples). Additional rebate of $500 per child.
- Payments will be based on 2019 tax returns, or 2018 tax returns if 2019 is not filed yet. Funds will be deposited to your bank account or mailed to your address per your 2019 or 2018 address. If your address, bank account, or and family situation has changed, it is to your advantage to file your 2019 tax return immediately. It is always wise to update the USPS about your address change.
- If you typically pay for tax preparation services from your refund (Refund Transfer), the IRS will still use your direct bank information. According to EPS Financial/Meta Bank (a Refund Transfer Bank), such banks will not be involved in disbursement of the stimulus.
- Payments will not be reduced if you owe prior-year tax. But owing child support may limit your funds.
- If you did not file a tax return in 2019 or 2018, you are not eligible for the support. If you have genuine back year taxes to file, electronic filing (e-file) is the fastest way to file those taxes. You may not be able to e-file back year taxes using do-it-yourself software.
- If you are a retiree who was not required to file a return in 2018 or 2019, the IRS will use your Social Security benefit statement to determine eligibility for payment. You do not have to file a simple tax return. In a letter to the National Association of Enrolled Agents (Friday April 3, 2020), IRS Commissioner Chuck Rettig indicated that the IRS will soon have a free website for retirees and disability income recipients to update the IRS with their bank information. He further suggested that such people (who have no technical need to file taxes) can indeed choose to file a simple tax return to efficiently update the IRS with such information.
- Retirees/social disability aid recipients who are taking care of dependents (and technically file no tax returns) may find it wise to proactively file a simple tax return (with direct deposit information) to reflect their dependents. Otherwise, they will get less funds because the IRS does not have their accurate household information.
- The payments phases out beginning at Adjusted Gross Income (AGI) of $75,000 for single taxpayers, $150,000 for married taxpayers, and $112,500 for head of household taxpayers. The reduction is $5 for each $100 of (AGI) over the relevant threshold.
- If you are disqualified because your income is too high, but you run a business (including 1099 Misc. income self-employment) that was operational before February 15, 2020, you can apply for SBA grants (up to $10,000) or loans (maximum of $2 million or $10 million).
- Non-residents/Foreign Nationals: Anyone with an ITIN is not eligible for the stimulus payments. If one spouse has an SSN, but the other does not, the couple is ineligible for the payment (there is an exception for military families).
- There are U.S. citizens who are not eligible to get the stimulus aid. They include children aged 17 and 18, and college students age 19-23 who can be claimed on their parents’ tax returns (even if those parents do not claim the child). Adults who can be claimed as a dependent (say a disabled sibling or a frail parent) are also not eligible. Estates are not eligible either. Anyone who had no income in 2018 or 2019 is not eligible for the stimulus; you cannot e-file a zero-income tax return.
Remember, the IRS has extended the 2019 tax filing deadline until July 15, 2020. However, do not confuse the IRS federal deadline with your State tax filing deadline. You still must observe your state tax filing deadline if it is not aligned with the IRS.
Use coupon code ARCHER40 to get a 40% discount for remote tax filing services before April 15, 2020! We receive your tax documents securely and can meet you to answer your questions using video conferencing. Your tax return is prepared by an experienced tax professional, so there is no frustration of having to do your own taxes. Let our trusted professionals handle everything while you focus on other vital things.
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