Coronavirus Aid, Relief, and Economic Security (CARES) Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed by the President on March 27, 2020. The law provides over $2 Trillion in aid related to the COVID19 virus. There are several tax related provisions in the law.

• Recovery rebates.

Key takeaways

  • No action is required of most eligible individuals
  • Amount is $1,200 ($2,400 if filing jointly) plus $500 for each dependent under age 17
  • Payments may take up to two months to be issued to all eligible individuals

 

Details

An advance refundable credit of 2020 taxes will be sent to eligible individuals within the next several weeks. A payment of $1,200 ($2,400 for eligible individuals filing a joint tax return) plus $500 for each qualifying child of the taxpayer(s) will be automatically sent to recipients. A qualifying child is one where the taxpayer(s) received a child tax credit and the child is under age 17.

Observation: As the law is written, children age 17 and above and eligible to be claimed as a dependent are not eligible for a credit. We assume the age will be determined as of December 31, 2020, but we will need guidance from the IRS to be certain.

Observation: Individuals who have no income or whose income is tax-exempt - including recipients of Social Security benefits - are eligible for the credit.

To receive the full amount of the credit your adjusted gross income (AGI) must be less than $150,000 for a joint return, $112,500 for a head of household, and $75,000 for all other taxpayers. For taxpayers making more than these thresholds the payment will be reduced by 5% of the AGI in excess of these amounts.

If an individual hasn't yet filed a 2019 income tax return then the IRS will use their 2018 return to compute the credit. If no 2018 return was filed then information from the Social Security Administration or other sources will be used. 

The payment will be direct deposit if your 2018 or 2019 refund was direct deposited; otherwise, a check will be mailed. If the payment is direct deposited into your bank account a notice of the amount will be mailed to you.

If your 2020 tax return shows that you should have received a higher credit than you did the excess will be credited to you on that return.

Actions to take

No actions are required. Be very cautious of emails and websites asking you to register for the rebate; these are most likely fraudulent and are attempts to steal your identity. 

Additional text will be added covering:

Payroll tax credit refund

Employee retention credit

Retirement plans

Charitable deductions

Payroll tax delay

Net operating losses

Excess loss limitations

Tax News Disclaimer
Limited Nature of Information

The topics discussed on this website are subject to a number of limitations and restrictions, may change without notice, and should be supplemented with professional advice. Contact our office to schedule an appointment so we can discuss your unique tax situation and if these topics or others can benefit you.

Statement on Tax Advice

Any statements or tax advice that are contained on this website are not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.

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