Answering a Few CARES Act Questions

April 15, 2020 by gjsturm88 2 Comments

Welcome back! Today we’ll answer a few questions related to the tax rebate or stimulus check provided by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act.

First question – has the CARES Act impacted the tax filing deadline? Yes, the tax filing deadline for your federal income tax has been pushed back to July 15^th, replacing the original deadline of April 15^th. Your contribution deadlines for IRAs and HSAs have also been pushed back to July 15^th. However, there are a few reasons you may want to file your taxes earlier than that. The earlier you file, the less likely you’ll become a target for a tax scam or identity theft. The IRS has a great list of their “dirty dozen” potential tax scams! Also, if you’re worried that you’ll owe taxes, the deadline for your payment, regardless of when you file, has also been pushed back to July 15^th. Lastly, while the federal income tax deadline has been changed, the Virginia individual tax filing deadline has not, and remains May 1^st. The state has, however, pushed back the date for late penalty payment to June 1^st, meaning no penalty will be owed if you pay your Virginia income taxes by June 1^st.  For more state updates, click here.

Next question – how much is the stimulus check? Most households will receive a check or direct deposit of $1,200 per adult, and $500 per child. For married households, each spouse will receive $1,200, for a total of $2,400.

Are households receiving $500 for all dependent children? Not necessarily. There are a few criteria in order for a child to qualify – they must be 16 or younger, and they must have provided for less than half of their own expenses and have lived with the tax filer for more than six months in the most recent tax year.

Do all households receive a check? Also no. Here is a helpful chart to give you an idea of who will receive the stimulus check.

Individual tax payers whose adjusted gross income is below $75,000, as well as joint filers making less than $150,000 will receive their full payment, $1,200 and $2,400, respectively, plus $500 for each qualifying dependent child. Things get a little trickier after that. For filers making more than this amount, payment will be reduced by $5 for every $100 over the income limit. For example, a single filer making $76,000, or $1000 above the $75,000 threshold, will have a $50 reduction on their payment and will receive $1,150. Individual filers making $99,000 or more, and joint filers making $198,000 or more will not qualify for a payment for themselves or for their children. However, those filing head of household who make less than $112,500, will receive the full payment.

How will my income be determined? Your adjusted gross income from your most recent filed tax return will be used. If you filed taxes for 2019 already, then they will use that information, otherwise they will use information from your 2018 federal tax return.

Is this payment taxable? Will I have to pay it back? No to both! The stimulus check is technically a refundable tax credit for the 2020 tax year, meaning you will not owe taxes on the payment and you will not have to pay any of it back, even if your tax liability in 2020 is less than your payment amount.

Since this is a refundable tax credit, what happens if my tax situation changes in 2020? Will this affect my eligibility? It could, but it can only help and not hurt you. For example, if you file jointly and made $100,000 in 2019, you are eligible for the full rebate. Even if your household income doubles to $200,000 in 2020, you will not be asked to repay that $2400. Also, if your child was 16 during your 2019 tax year, you will not have to pay the $500 back when your child turns 17 in 2020. On the flip side, if you are not eligible for the rebate now, but would be next year; for instance, if you have a child in 2020, or your income is below the threshold in 2020 but not in 2019, you will likely be eligible to receive those tax credits when you file your 2020 taxes in 2021.

What happens if I have not filed my taxes for several years? Those receiving social security payments will be sent their rebate directly to the bank account associated with their benefits. Otherwise, if you haven’t filed your taxes in 2018 or 2019, the IRS has set up a web portal to submit information in order to receive your payment.

When will I receive my payment? If you provided direct deposit information with the IRS for your 2018 or 2019 tax return, you should receive a direct deposit this week or next week, if you haven’t already. However, if you do not receive a payment through direct deposit, you will receive your check through the mail, which unfortunately could take several months. (**update: the IRS has provided a link to set up direct deposit, for more information, here is their link)

This is a continually evolving situation, so if you have any questions, feel free to contact me at gjsturm@vt.edu. Also, be sure to check out Dr. Travis Mountain’s publication on the topic!