Recovery Rebates

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which passed the Senate by a 96-0 vote late Wednesday, provides for a one-time payment to taxpayers – "recovery rebates" – which will be treated as advance refunds of a 2020 tax credit. The House will vote on the Act Friday and, once approved, forward it to the President for signature into law.

How much?

Under this provision, individuals will receive a tax credit payment of $1,200 ($2,400 for joint filers) plus $500 for each qualifying child (16 years of age or younger). The credit is phased out for taxpayers with adjusted gross income (AGI) above $150,000 (for joint filers), $112,500 (for heads of household), and $75,000 for singles. Taxpayers with AGI above $198,000 (for joint filers with no children) and $99,000 for singles with no children would not be eligible for the payment. The credit is not available to nonresident aliens, individuals who can be claimed as a dependent by another taxpayer, and estates and trusts.

How is it determined?

The IRS will look at your 2019 tax return for your filing status, AGI, and information about your children. If you haven’t filed your 2019 return, the IRS will look to your 2018 return. If your income was below filing requirements and a return wasn’t filed for 2018 or 2019 it isn’t known yet if you will get a check. If this is the case, you may want to file a 2019 tax return. It is possible that the IRS will look to social security records for 2019 income if a return was not filed.

How is it paid?

If you have had your tax refunds directly deposited into your bank account the IRS has your bank account information and your rebate payment will be directly deposited into your bank account.  If the IRS does not have your banking information, or if that information is no longer valid, a check will be issued.

When will I receive it?

Payments are expected by mid-May.

Tax treatment?

The payment is to be an advance payment of a tax credit for the 2020 tax year. Taxpayers will reduce the amount of the credit available on their 2020 tax return by the amount of the advance refund payment they receive. Conversely, if you were eligible for the payment, but did not get it, you will be able to recover it when your 2020 tax return is filed. Overpayments of rebates due to a higher income in 2020 will not be clawed back.

Do young adults get payments?

Young adults (children 17 to 19 years of age, or under age 24 if a full time student) still living at home will not get a check if they can be claimed as a dependent on someone’s return.