ECONOMIC IMPACT/STIMULUS PAYMENTS – ELIGIBILITY & STATUS

The IRS has started issuing Economic Impact Payments, also known as stimulus payments, to eligible individuals as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Here are some things you need to know:

Are You Eligible?

You are eligible to receive an Economic Impact Payment (EIP) if you:

  • Are a US citizen or US resident alien (green card holder).
  • Cannot be claimed as a dependent on someone else’s return.
  • Have a Social Security number (SSN).
  • Reported adjusted gross income within the threshold based on your filing status and the number of your qualifying children. See below.

Note: If you are not a US citizen or a green card holder, but you file a US resident tax return, you may still be eligible. Please reach out to us for guidance on your particular situation.

If you are eligible, you should review these next steps:

  • File your 2019 tax return. If you have not submitted your tax information to us, please contact us or upload your information to our portal.
  • If you are not ready to file your 2019 tax return, the IRS will use information from your 2018 tax return to calculate your payment.

How Much Are the EIP Payments?

Taxpayer

EIP Payment Amount

Individuals

$1200

Married Couples

$2400

Parents

$500 for each qualifying child under 17 as of 12/31/2020

You will receive a reduced payment, based on your AGI threshold:

Filing Status

AGI Threshold

Single or Married Filing Separately

$75,000 to $99,000

Head of Household

$112,500 to $136,500

Married Filing Jointly

$150,000 to $198,000

The amount of the reduced payment will be based on your specific adjusted gross income. You are not eligible for a payment if your adjusted gross income is above the threshold for your filing status.

If you have a qualifying child, the thresholds above increase by $10,000.

When Are Payments Expected?

EIP payments will be made by the IRS throughout the remainder of 2020. If a taxpayer does not receive a payment this year, they can claim the payment amount by filing a 2020 tax return next year.

How Are Payments Received?

The IRS will process EIP payments via direct deposit, if they have your bank account information from the last tax return you submitted (2018 or 2019). If you are unsure that the IRS has your correct bank account information, you can use the IRS Get My Payment tool to provide updated details. If the IRS is unable to process the direct deposit, they will mail a physical check to the address you have on file with the IRS.

Are US Citizens Living Abroad Eligible?

Yes, if you meet the criteria above. We strongly suggest using direct deposit to receive your EIP payment, as there may be additional hurdles or significant delays if the IRS has to mail physical checks to a foreign mailing address.

How Does the Payment Impact My 2020 Tax?

The IRS will only issue EIP payments until the end of 2020. Eligible individuals who do not receive the payment can claim a recovery rebate credit on their 2020 tax return. If you received an advance payment during 2020 that was less than the credit you are entitled to, you will be able to claim the balance of the credit when you file the 2020 tax return.

On the other hand, if the advance payment you received was greater than the credit to which you are entitled to, you do not have to pay back the excess. That’s because the 2020 recovery rebate credit cannot be reduced to below zero.

The payment is not considered to be income, and you will not owe federal tax on the payment you receive. Each state will have determine if payments are taxable. We are waiting to receive an update on whether California will subject the payment to tax. 

What Else Do You Need to Know?

The IRS will not call, email, or text you about your EIP payment or contact you to request personal or bank account information. Watch out for websites and social media attempts that request money or personal information and for other scams related to the COVID-19 pandemic. Read more about IRS warnings here.

For security reasons, the IRS will be mailing a letter about the payment to each recipient’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.

Please connect with us for additional guidance.