News & Blog

March 27, 2020

CARES Act Recovery Rebates

Recovery Rebates What You Need To Know

The CARES (Coronavirus Aid, Relief, and Economic Security) Act, appears to make a significant impact on the economy. The majority of the tax relief is designed to increase liquidity with the introduction of recovery rebates for individuals.

Who Qualifies For Recovery Rebates

Roughly 125 million people will receive a rebate, or about 83 percent of tax filers, according to Kyle Pomerleau, a tax expert at the American Enterprise Institute.

According to the CARES Act, qualifying individuals earning up to $75,000 a year will be eligible for the full $1,200 check. Reduced checks will go out to individuals making up to $99,000 a year (the payment amount falls by $5 for every $100 in income above $75,000).

Married couples are eligible for a $2,400 check as long as their adjusted gross income is under $150,000 a year. Reduced checks, on a sliding scale, will go out to married couples who earn up to $198,000. Married couples also will receive an additional $500 for every child under 17.

People who file as a “head of household” (typically single parents with children) are eligible for a $1,200 check if they earn up to $112,500 a year. Reduced checks are available for heads of household earning up to $136,500 annually. Heads of household will also receive an additional $500 per child under 17.

Who Is Disqualified From Receiving Relief

People excluded from receiving a recovery rebate are the wealthy, “nonresident aliens” (i.e., foreigners who do not hold a green card) and “dependents” who can be claimed on someone else’s tax return.

How Will The Payments Be Delivered

If you have already filed a 2019 tax return, the Internal Revenue Service will use the direct deposit information on your 2019 return to send your payment to your bank account. If you don’t provide the IRS with your direct deposit details, then the IRS will mail you a check. If you have yet to file a 2019 tax return, the IRS will see if you have filed a 2018 tax return and use that information to determine whether you meet the qualifications for a check and to find your bank details or mailing address.

Calculate Your Payment

The IRS has provided a schedule to calculate your rebate payment under the CARES Act. Click this link to see how much your recovery rebate may be.

Payment Delivery Timeline

The U.S. government is supposed to send rebate checks or direct deposits with the goal of getting the first payments out the week of April 6 but might get pushed back to later in April.

Social Security Recipients

Taxpayers on Social Security are eligible to receive the coronavirus rebate payment as long as their total income does not exceed the limit. Low-income earners on Social Security do not need to file a tax return. As long as individuals have received the Social Security benefit statement (Form 199), the payment will be delivered the same way they receive their Social Security payments. Retirees and disabled Americans are also eligible for the recovery rebates.

Special Circumstances

Changes in Income
If a taxpayer earned too much in 2018 and 2019 but now lost their job, these workers are not eligible for immediate relief. They may be eligible for a rebate when they file their 2020 tax returns next year. There are proposals by Treasury to possibly create a program for people who fall into this category so they may receive relief sooner, but details have not been announced.

The government is using tax returns from 2019 and 2018 to determine who qualifies for relief. If you get a relief payment and then your 2020 income is higher than your 2019/2018 income, the money does not have to be paid back.

Child support
The only factor that would reduce the amount of the recovery rebate is if a taxpayer has overdue child support that the Federal government has knowledge of.

Other tax issues
The rebates received due to this national emergency are not taxable. However, if you owe taxes it will not affect your relief payment.

President Trump did mention that another payment may occur in the summer, but only if the economy remains anemic through the spring and an additional boost is warranted. The Treasury and IRS are in the midst of announcing details and creating a website where more information will eventually be posted.

Consider leaning on your CPA for cash flow guidance, tax deadlines, help in completing SBA loan and the new CWCA loan applications, and the CARES Act. Our CPAs are available, and we have the knowledge, skill, and information that you need right now to properly address your financial needs in a timely fashion.

Maria D. Stromple, CPA, MST

Maria is a partner at Wilke & Associates servicing closely-held businesses in manufacturing, real estate, transportation/logistics, and technology industries as well as high net worth individuals and executives in delivering effective tax strategies.

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