CARES ACT
Recovery Rebate Checks
Q AND A
Q. When will these funds be arriving and how will I receive them?
Q. The IRS does not have my direct deposit information. What can I do?
Q. My income was lower in 2018 and 2019. My income increased in 2020, now what?
Q. I am not typically required to file a tax return. Can I still receive my payment?
RECOVERY REBATES
Recovery rebate checks of up to $1,200 ($2,400 for taxpayers married filing jointly) will be made available to most individuals and families, with an additional $500 for every child. There are no limits on the number of children that qualify.
These recovery rebate checks are reduced by $5 for each $100 a taxpayer’s income exceeds $75,000 ($150,000 for taxpayers married filing jointly and $112,500 for head of household). This means that taxpayers making below $99,000 ($198,000 for taxpayers married filing jointly) will generally receive at least some amount of a recovery rebate check.
Q. How much will I get?
The complete phase out of the recovery rebate check is dependent on each taxpayer’s filing status, adjusted gross income in the applicable tax year, and the number of children claimed by the taxpayer. In general, the rebate checks will be based on a taxpayer’s 2020 taxable income. Since nobody knows those amounts yet, these new rules provide that qualifying income levels can be tentatively based on the taxpayer’s most recently filed tax return (either 2019 or 2018).
Q. When will these funds be arriving and how will I receive them?
Rebates are to be issued as rapidly as possible, and may be disbursed electronically to accounts authorized by a payee on or after January 1, 2018, for the delivery of a refund of taxes.
Q. What if the deposit information on my tax return has changed, account closed or belongs to someone else?
Not later than 15 days after the date on which the Secretary distributed any payment to an eligible taxpayer, notice shall be sent by mail to such taxpayer's last known address. Such notice shall indicate the method by which such payment was made, the amount of such
payment, and a phone number for the appropriate point of contact at the Internal Revenue Service to report any failure to receive such
payment. Taxpayers will contact the IRS to provide guidance as to desired delivery rebate method of rebate.
Q. The IRS does not have my direct deposit information. What can I do?
In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.
Q. What if I was claimed as a dependent during the 2018 and 2019 tax years but am now supporting myself?
Remember, this is an advance against facts and circumstances that apply to 2020 tax returns. If your marital status changes or your filing status changes, you will apply for the rebate on your 2021 tax returns.
Q. What if my income is not required to be reported? I collect only Social Security or Railroad Retirement?
Certain taxpayers that are not required to file a tax return, such as when receiving Social Security benefits, are still eligible for the recovery rebate checks. Instead of using a tax return the government can use information from the Social Security Information.
Q. Is this refund taxable?
The refund checks are generally not taxable income and are instead treated as an advance of the refund a taxpayer would normally receive when filing their 2020 tax return.
Q. I made less in 2020 than I did in 2018 or 2019. I didn't qualify for the credit or my credit was reduced. How does that work?
This means that when filing their 2020 tax returns in 2021 the taxpayer will have to recalculate the amount of their credit based on their 2020 information. If there is a change in circumstances for the taxpayer where they are currently phased out based on a 2019 (or 2018) tax return, but would otherwise be entitled to the full credit based on their 2020 tax return, the taxpayer will receive a credit in 2020 for the difference.
Q. My income was lower in 2018 and 2019. My income increased in 2020, now what?
An open issue in this piece of legislation is what happens to those taxpayers who receive a rebate check based on 2019 (or 2018) tax information but would have received a lesser amount based on their 2020 income. The CARES Act does not explicitly require income recognition on any excess credit (which was required in the House’s bill). We anticipate that future regulations may address this issue.
Q. I am not typically required to file a tax return. Can I still receive my payment?
Yes. People who typically do not file a tax return will need to file a simple tax return to receive an economic impact payment. Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.
