Carrying on our tradition of providing you with Solutions Beyond the Obvious, we are pleased to bring you our “Ask the Experts” series of articles. In these articles, our Tronconi Segarra & Associates tax experts identify and explain the significant tax changes that were passed as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, which can provide additional relief for businesses and individuals facing economic hardship as the result of the coronavirus pandemic. Contact your Tronconi Segarra & Associates tax advisor for more information about any of the topics discussed in these articles.
Melissa S. Howell, CPA
Millions of Americans are starting to see Economic Impact Payments deposited directly into their bank accounts as authorized by the CARES Act. These payments are intended to help Americans combat the financial effects of the COVID-19 pandemic. The Treasury and the IRS are working with unprecedented speed to provide fast and direct assistance to the American people. The IRS will continue to process these payments through the end of 2020.
U.S. citizens and U.S. resident aliens, who are not the dependent of another taxpayer, are eligible to receive a $1,200 economic impact payment if their adjusted gross income is under $75,000 for single filers or $112,500 for head of household filers. Married couples are eligible to receive a $2,400 payment if their adjusted gross income is under $150,000. Payments will be 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 income exceeding $99,000, head of household filers with income exceeding $136,500 and married couples exceeding $198,000. In addition, a $500 payment will be made for each qualifying child under the age of 17 claimed as a dependent on your tax return. Dependents 17 years of age and older do not qualify for the additional $500 payment.
Eligible retirees and recipients of Social Security retirement, disability (SSDI), survivors’ benefits, Railroad Retirement, Supplemental Security Income (SSI) and VA Compensation and Pension (C&P) will automatically receive a $1,200 payment even if they were not previously required to file a tax return. The IRS will use the information from your 2019 benefits to generate a payment to you if you did not file tax returns in 2018 or 2019. You will receive your payment automatically as a direct deposit or by mail, just as you would normally receive your federal benefits.
For any other taxpayers who have little or no income and didn’t file a tax return or don’t receive any federal benefits, they may be eligible to receive an economic income payment so long as they are not the dependent of another taxpayer and have a work-eligible Social Security number. There is no qualifying income requirement to receive this payment. These taxpayers will need to register using the Non-Filers tool on IRS.gov as soon as possible.
The economic impact payment is considered an advance on a tax credit that you may claim on your 2020 tax return. If you did not receive the full amount to which you believe you are entitled to, you will be able to claim the additional amount when you file your 2020 tax return. In addition, for any child born or adopted during 2020, you must wait to file a 2020 tax return to claim the additional $500 tax credit.
The distribution of these economic impact payments commenced on April 15th and are being distributed automatically for most Americans. For those taxpayers who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment. If you haven’t filed your tax return for 2019, but filed a 2018 tax return, the IRS will use information from your 2018 tax return to calculate the payment. The economic impact payment will be deposited directly into the same bank account reflected on the prior tax return filed. If you did not receive your refund by direct deposit based on your prior return, you have the opportunity to provide bank account information using the Get My Payment tool on IRS.gov before your payment is processed, otherwise payment will be mailed to the address as reflected on your most recent tax return.
For security reasons, the IRS plans to mail a letter about the economic impact payment to the taxpayer’s last known address within 15 days after the payment is made. The letter will provide information on how the payment was made and how to report any failure to receive the payment. Clients of Tronconi Segarra & Associates should retain a copy of this letter and provide it to your Tronconi Segarra & Associates tax advisor along with your 2020 tax information.
Please contact your Tronconi Segarra & Associates tax advisor for more information on this or any tax matter. If you do not have a Tronconi Segarra & Associates tax advisor, please call 716.633.1373; or Contact Us through our website with your question.
This article has been prepared for general guidance on matters of interest only; it does not constitute professional advice. You should not act upon the information contained in this article without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy of completeness of the information contained in this article; and, to the extent permitted by law, Tronconi Segarra & Associates LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it.