Economic Impact Payments

CARES Act:  Economic Impact Payments

briefing by David Kaplan, CPA;  Ron Kuyath, CPA and  Jill Clark, CPA

On Friday, March 27, 2020, President Trump signed the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) into law which included a recovery rebate payment that would go out to individuals.  This recovery rebate is now being called the “Economic Impact Payment”.

On April 10, 2020, the IRS released additional guidance related to the Economic Impact Payments.  The following are the key points from their news release:

  • They have stated that the automatic payments for those with direct deposit will begin the week of April 13th.
  • A tool is now available for those who normally do not file a tax return at https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here. This tool is for non-filers to provide basic information to the IRS in order to determine their eligibility and calculate the amount of their Economic Impact Payment.  This tool should be used for those who:
    • Had gross income that did not exceed $12,200 ($24,400 for married couples) in 2019
    • Were not otherwise required to file a federal income tax return for 2019 and didn’t plan to.
  • On April 1, 2020, the IRS clarified that social security recipients who are not typically required to file a tax return, do not need to file anything further. These individuals will automatically receive their payment in the same manner they normally receive their benefits payments, through direct deposit or via a paper check.  However, if a social security recipient also has a dependent, then they should use the “Non-Filers” tool to receive credit for their dependent.
  • Those who receive Supplemental Security Income (SSI), veteran’s disability compensation, pension or survivor benefits from the Department of Veterans Affairs who did not file returns for the 2018 or 2019 tax years can either use the “Non-Filers” tool or wait for further guidance from the IRS as they try to simplify delivery for these groups.
  • By April 17th, the IRS expects to add another tool for individuals to check on the status of their payments. It will be called the “Get My Payment” tool, and will enable individuals to check on the status of their payment, including the date their payment is scheduled to be deposited in their bank accounts or mailed to them.  An additional feature in this tool will allow eligible individuals a chance to provide their bank account information so they can receive their payments quicker.

The following is a link to the IRS webpage where you can check for the latest guidance on this topic and/or other topics surrounding ‘Coronavirus Tax Relief’:  https://www.irs.gov/coronavirus

The following is the original summary of the CARES Act provisions:

  • Individuals, meeting certain income thresholds, will receive checks (or direct deposits) in the amount of $1,200 ($2,400 for those married filing jointly) plus $500 for each qualifying child (not attained the age of 17).
  • The applicable rebate amount will be reduced if a taxpayer’s adjusted gross income (AGI) exceeds certain thresholds: $150,000 (married filing jointly); $112,500 (head of household); $75,000 (all other taxpayers).  The amount a taxpayer will receive will be reduced by 5% of the excess of their AGI over their applicable threshold amount.  The following are a couple of examples to show how this works:
    • Example #1: Single taxpayer, no kids, AGI of $100,000; $1,200 potential rebate
      • Determine excess of AGI over applicable threshold: $25,000 ($100,000 AGI minus the $75,000 threshold for single taxpayer)
      • Calculate 5% of excess amount: $1,250 ($25,000 excess amount x 5%)
      • Determine eligible rebate amount: $0 ($1,200 potential rebate amount – $1,250 reduction amount)
    • Example #2: Married couple, two kids, AGI of $200,000, $3,400 potential rebate
      • Determine excess of AGI over applicable threshold: $50,000 ($200,000 AGI minus the $150,000 threshold for married filing joint taxpayers)
      • Calculate 5% of excess amount: $2,500 ($50,000 excess amount x 5%)
      • Determine eligible rebate amount: $900 ($3,400 potential rebate amount – $2,500 reduction amount)
    • Adjusted gross income determinations will be made based on the taxpayer’s 2019 tax return. For taxpayer’s who have not yet filed their 2019 return, the adjusted gross income determination will be made based on the 2018 filing.  For taxpayer’s who have not filed a 2018 or 2019 income tax return, information will be pulled from 2019 Forms SSA-1099 (Social Security Benefits Statement) or Form RRB-1099 (Social Security Equivalent Benefit Statement).
    • Taxpayers will be required to recalculate the credit on their 2020 return. If, based on their 2020 adjusted gross income, they are eligible to receive a credit amount in excess of the advanced rebate amount received, they will get that additional credit against 2020 income taxes.  However, if a taxpayer receives more advanced credit than is calculated on their 2020 return, the taxpayer will not be required to repay any of the advanced amount.
    • Taxpayers, and their spouse and dependents, must have provided valid identification numbers on their tax return to be eligible for the rebate amounts. There are certain exceptions for members of the Armed Forces.
    • The following are not eligible to receive recovery rebate payments: (1) nonresident aliens; (2) estates and trusts; (3) individuals that are able to be claimed as a dependent on someone else’s tax return.
    • Amounts received will be treated as a refund of taxes paid, therefore; will not be considered additional taxable income to the recipients.

442x316 Ron Kuyath 12

Ron Kuyath Tax Partner, CPA

Ron is a tax partner with over 40 years of experience in public accounting.  Ron has been serving clients in various industries, including affordable housing, commercial real estate, manufacturing and distribution (consumer products, industrial controls, plastic molding and extrusion, textiles).  He has consulted on numerous merger and acquisition transactions, assisted with tax accounting method changes […]

Jill Clark

Jill W. Clark Director of Tax Quality Assurance, CPA

NC License #30742

David Kaplan 2019 cropped

David Kaplan Principal, CPA

NC License #39658 FL License #AC39298