Federal lawmakers have launched several stimulus phases to provide financial relief this spring. Households and small businesses (so far) receive the most support from the CARES Law which became law on March 27, 2020.

There are many relief measures in this $ 1.2 trillion stimulus bill. Once dunning check and improved unemployment benefits are two hallmarks of the CARES Act.

Despite the initial enthusiasm, some are still waiting to receive their Economic Impact Payment of $ 1,200 —and may never receive the full amount. Unfortunately, the CARES Act may have unwittingly left them out.

Today, the House of Representatives must vote on the Act on the HEROES. Based on the reaction of Republicans in the Senate, the HEROES law is unlikely to become law. But we can still study it because it aimed to amend the CARES law.

The CARES Act, probably unintentionally, left many Americans behind in issuing stimulus checks. The HEROES Act changed some of these situations – see which ones would have been fixed and which ones were ignored.

This may give us an indication of what Congress hopes to fix under the CARES Act in future stimulus bills.

Filing a joint tax return without a social security number

You need a valid Social Security Number (SSN) to receive a stimulus payment. The CARES Act stimulus check requires every married taxpayer to have a Social Security number if their tax return status is “Married, Joint Filing.”

Some taxpayers with a Social Security number but married to a non-US citizen without a valid taxpayer identification number do not receive a stimulus check or only receive a check for $ 1,200. But that is only if their statement is “Married, filed separately”.

the Act on the HEROES would make it easier to receive your CARES Act stimulus payment if one of the spouses does not have a Social Security number and only has an IRS Tax Identification Number (ITIN). At present, the IRS does not issue stimulus checks for this complicated situation.

It is possible for resident foreigners with a social security number receive a stimulus check. Members of the military with spouses who do not yet have a Social Security number may be eligible for a check for $ 2,400 plus $ 500 for eligible children.

Your spouse will not be entitled to a refund if they only have an ITIN and you are not serving in the armed forces. If your spouse receives a social security number in 2020, they can still receive a stimulus payment. But they may have to wait to file a tax return for the current year.

Older dependent children

Many students and children aged 17 and over have been left behind.

These young adults are old enough to receive the stimulus payment of $ 1,200 on their own, but they cannot get a check because many of their parents are still claiming them on their taxes. Instead of the older child receiving the full check like an adult taxpayer, the parent instead receives a credit of $ 500.

Parents can declare their older children as dependents when they meet at least half of their basic needs. While this exclusion may come as a surprise, the current IRS rules for child tax credit applies to children 16 and under.

New college graduates may feel the financial pain of this stimulus control loophole as they enter an extremely weak job market. That check for $ 1,200 could have bought essentials, served as a down payment for an apartment lease, or made student loan repayments (despite the deferral of federal loans)

The IRS says these dependent adults cannot claim the $ 700 difference on their 2020 tax return.

At least in this case, these recent graduates might be able to claim the full refund amount of $ 1,200 on their 2020 tax return if no one else claims them on another 2020 tax return. They would get the stimulus. next year in their repayment, but that wouldn’t help them now.

The HEROES Act would change the calculation to use “dependents” and not just those who qualify for the child care tax credit. This would allow parents of dependent children aged 17 and over to claim the $ 500 per child, when they would not be eligible under the current wording of the law.

The first declarers

You are probably familiar with the expression “The early bird catches the worm.” Filing your taxes as early as possible is a smart move in most years. However, being proactive can hurt you this year.

In mid-March, the federal government extended the 2019 federal income tax filing deadline from April 15 to July 15, 2020.

Since we don’t know how much you’ll earn in 2020, the IRS uses your 2019 or 2018 tax return to calculate your stimulus check amount. Filing your 2019 tax return already can prevent you from getting a check this spring if your income is too high.

This loophole affects you if your 2019 income is within the income phase-out windows but your 2018 adjusted gross income is less than $ 75,000 (single) or $ 150,000 (married, jointly filing).

Waiting to file your 2019 taxes means you’ll receive a check this spring if your 2018 income qualifies. There does not appear to be a “clawback provision” whereby the IRS recovers part of your dunning check balance if it pays you too much.

There is still a chance that you can get a discount on your 2020 taxes. You can benefit from the CARES Act clawback refund in 2021 when your 2020 income falls below the upper income limit.

Single taxpayers get the full refund of $ 1,200 with adjusted gross income below $ 75,000. You receive a reduced repayment amount with income not exceeding $ 99,000.

Joint filers get full reimbursement of $ 2,400 with annual income less than $ 150,000. The IRS issues a partial refund up to $ 198,000.

You will receive the full refund of $ 500 per child when your income qualifies for the full refund of $ 1,200. Otherwise, the IRS will phase out the child rebate as you approach the maximum income limit.

You declare your 2019 taxes late

Even if you have until July 15, 2020 to file your federal income taxes for 2019 without penalty, waiting too long to file may result in a smaller refund.

The IRS uses your 2018 tax return if it processes your stimulus check before filing your 2019 tax return.

Using your 2018 tax return can be a problem for these two potential reasons:

  • Your 2019 income is less than your 2018 income
  • A child was born or you adopted a child in 2019

Although you will receive a small check this spring, you should get the remaining refund at tax time. If it turns out that your 2020 income is even higher than your 2019 income, you may not receive the additional amount.

The IRS sends Notice 1444 to every household approximately 15 days after sending your stimulus payment. All taxpayers should keep the form for reporting the payment amount on their taxes. If you believe that the IRS still owes you money, this notice allows it to accurately calculate the outstanding credit.

People who owe child support may not receive a check

The IRS withholds the stimulus check from parents who owe child support payments. Garnishment occurs when your name appears on the List of cash compensation. However, the IRS does not capture the economic income payment if you owe tax arrears, if you have past due federal student loans, or other eligible debts in the process of collection.

The HEROES Act would amend the CARES Act to give it the same protections that social security benefits enjoy against foreclosure. It “must not be subject to transfer, assignment, execution, debit, attachment, garnishment or any other legal process, nor to the application of a law on bankruptcy or the ‘insolvency, to the same extent as payments described in Section 207 of the Social Security Act (42 USC 407). “

Recently divorced couples may not receive a full refund

Parents who divorce in 2019 or 2020 can also find themselves in a complex situation. It can be difficult to determine who gets the $ 500 rebate for each child. The IRS prioritizes the parent claiming the head of the household on their 2019 taxes because they have primary custody.

Your attorney may ask you to divide the child part or return the full amount to your ex-spouse depending on your custody agreement.

You won’t need to reimburse the IRS if you each receive a payment of $ 500.

A family member dies or is incarcerated

You may need to repay part of your refund if a family member dies in 2020. Incarcerated taxpayers also cannot receive a stimulus payment, although non-filers can get a stimulus check without earning any money. taxable income.

You’ll have to return your ineligible stimulus payment to the IRS by mail. You can send a personal check or money order if you received your rebate by direct deposit or if you already cashed the paper rebate check. The IRS asks you to resend the paper check if you haven’t cashed it yet.

Several of these situations have been dealt with by the HEROES law. Some have been dealt with by other means, such as the IRS direction that you must return checks sent to the deceased, and we’ll have to see what Congress is able to agree to before we know what will be. actually repaired.


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