We compiled a list of everything we know about the economic stimulus payments, and what steps tax pros and taxpayers need to take:
Seniors do not need to file a short return
Earlier this week, the IRS released IR-2020-61, which includes a statement that “some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.” Knowing that this directly conflicts with wording in the CARES Act, NATP contacted IRS Commissioner Rettig and key members of the House Ways and Means Committee to request clarification.
As of Wednesday night, the U.S. Department of the Treasury and the IRS announced that Social Security beneficiaries who are not typically required to file tax returns will not need to file an abbreviated tax return to receive the economic impact payment. Instead, payments will be automatically deposited into their bank accounts. The IRS will use information from the Form SSA-1099 and Form RRB-1099, and recipients will receive these payments as a direct deposit or by paper check, just as they would normally receive their benefits.
Please note, since the IRS would not have information regarding any dependents for these people unless they filed a tax return, each person would receive $1,200 per person, without the additional amount for any dependents.
First stimulus payments expected to go out week of April 13
According to our sources on the Hill, the Treasury Department and IRS officials have told the House Ways and Means Committee that the initial wave of payments will go out the week of April 13. The payments will automatically deposited into the same bank account reflected on the 2019 or 2018 return filed. In the coming weeks, the Treasury plans to develop a web-based portal that will allow individuals who have not recently submitted banking information to the IRS to do so, enabling them to receive payments immediately as opposed to waiting for a check to arrive in the mail.
Taxpayers in the first wave have direct deposit information on file with the IRS from their 2018 or 2019 tax returns. Paper checks would start going out in May to people who don’t have direct deposit information on file with the IRS. About 5 million checks will be sent weekly, and it could take up to 20 weeks to distribute all of them. People with the lowest incomes will get their checks first.
We’ve heard that the IRS anticipates creating a “Where’s my Economic Impact Payment?” tracker, similar to the “Where’s my refund?” system.
Payments are available throughout 2020
If someone who normally doesn’t file a tax return contacts you, let them know the IRS urges anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.
The IRS plans on releasing the “simple tax return” in the upcoming weeks. That form is expected to ask filers for their names, Social Security numbers, information on dependents and deposit information.
For those concerned about visiting a tax professional or local community organization in person to get help with a tax return, these economic impact payments will be available through Dec. 31, 2020.
There is no qualifying income requirement, but there is a phase-out for payments
There is no qualifying income requirement. Individuals with $0 of income are eligible for the payment provided they are not the dependent of another taxpayer and have a work-eligible SSN. Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples and up to $500 for each qualifying child.
Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.
Taxpayers with a lower 2020 AGI will receive a credit
The payment is actually an advance on a tax credit claimed on the 2020 tax return. If a taxpayer’s income is lower in 2020 than in 2019, any additional credit for which they are eligible will be refunded or will reduce the tax liability when the 2020 tax return is filed. As it stands, if your 2020 income is higher than the thresholds and you received the payment, you will not need to pay back any part of the payment.
Taxpayers who owe back taxes will still receive the payment
While the IRS has not officially provided guidance on this, the Senate Finance Committee stated that the bill turns off nearly all administrative offsets that ordinarily may reduce tax refunds for individuals who have past tax debts, or who are behind on other payments to federal or state governments, including student loan payments. The only administrative offset that will be enforced applies to those who have past due child support obligations that the states have reported to the Treasury Department.
NATP is working on additional resources
On Saturday, we released a Tax Update for COVID-19 Relief on-demand webinar that is free for members. While we know more today than we did when this was recorded, it’s still a great overview of the recent legislative changes.
Members also have access to:
- CARES Act Summary
- Client Newsletter Covering Filing Extension
- Client Newsletter Covering CARES Act
- Client Newsletter Covering the Stimulus Payment and Scams
We are working hard to develop case studies for all those unusual client situations (see our recent You Make the Call, for a perfect example), a guide to helping clients with the SBA loans and additional resources to help you through this unprecedented time.
Please visit our COVID-19 Office Resources page for a compilation of information available for small business loans, paid leave, remote meeting tools and more.
Our Facebook Group has been buzzing with tax pros helping each other out during this busy time.
If you’re not a member, but would like to join, use code BLOG and we’ll waive the $25 new member application fee! We also have a 30-day free trial you can check out.