Everything you need to know about the federal stimulus payments
Under the recently passed CARES Act, the U.S. government is planning to send out Economic Impact Payments (EIP) to taxpayers meeting certain income requirements. If you have paid taxes or received refunds by direct deposit in the past, your payment will be deposited directly to your bank account. If the IRS does not have your direct deposit information on file, you can provide it online, rather than wait for checks to be mailed out.
To check on the status of your payment or provide your banking information for direct deposit, use the IRS' new "Get My Payment" portal.
If you are wondering if you're eligible or how much you’ll receive, check out the answers to these frequently asked questions:
Are freelancers eligible to receive EIPs?
Yes. All taxpayers who cannot be claimed by someone else as a dependent are eligible to receive the EIP, depending on the income requirements below. Only nonresident aliens are excluded from this program.
What is the maximum EIP I can receive?
The CARES Act makes available $1,200 for each adult (up to $2,400 for couples), as well as $500 for each child available to taxpayers who meet the stated income thresholds outlined below:
· Individuals who made $75,000 or less ($150,000 for couples filing jointly, or $112,500 for those who file individually as the head of a household) in adjusted gross income based (AGI) on 2019 income tax returns will receive the full amount.
· Individual check totals start to phase out from $75,000 to $99,000 ($150,000 to $198,000 for couples filing jointly). The payments will be decreased by $5 for every $100 you make over the threshold.
· 2018 returns will be used to calculate your AGI if more recent information is not available.
· Ultimately, the package will be “reconciled after the fact” with your 2020 earnings, meaning if you earn more or less this year, you will have to pay back some of the money you received or get a bigger rebate next year.
What are the requirements to be considered a qualifying child?
According to the IRS, a child who qualifies for the Child Tax Credit on a 2019 return is a qualifying child for an EIP. In other words, the child must:
· Be your dependent
· Be under 17 years of age in the current tax year
· Have lived with you for over six months of the tax year
· Have had over half of their support provided by you
· Be a U.S. citizen, U.S. Resident or U.S. National.
Do college-age dependents qualify for an EIP?
No, unfortunately, they do not. Dependents ages 17 to 24 years do not qualify for the child tax credit, so they will not qualify for the additional $500 payment, even if they were claimed on your return.
However, students ages 18 to 24 who were not a dependent on another return and had income but were not required to file should file their tax return as soon as possible to receive the economic impact payment.
What if I don’t have any federal income tax obligations? Will I still receive a check?
Individuals with no federal tax liability will receive only $600. Nonresident aliens are not eligible for the rebate.
What if I didn’t file my 2018 or 2019 tax returns?
Taxpayers who have not filed their taxes for those years will not receive a check, unless they didn’t file due to only having social security income (forms SSA-1099 or RRB-1099). You are urged to file a tax return as soon as possible in order to receive your payment; once you file, you are eligible for the EIP.
What if I am not typically required to file a tax return—will I still receive a payment?
Yes. The IRS will use the information on the Form SSA-1099 or Form RRB-1099 to generate Economic Impact Payments to recipients of benefits reflected in the Form SSA-1099 or Form RRB-1099 who are not required to file a tax return and did not file a return for 2018 or 2019. This includes senior citizens, social security recipients and railroad retirees who are not otherwise required to file a tax return. If you are in this group, check IRS.gov/coronavirus for updates.
Do I need to file or apply to receive a stimulus check?
Most taxpayers do not need to take any action to receive their stimulus check. The IRS will calculate and automatically send the payment to those eligible.
How will the IRS know where to send my payment?
If you have already filed your 2019 tax return, the IRS will use the direct deposit information you provided to transfer the money to you. If you haven’t filed yet, they will use the 2018 information instead.
What if the IRS does not have my direct deposit information. What can I do?
You can provide your banking information using the newly unveiled "Get My Payment" portal on the IRS' website.
I need to file a tax return. How long are the economic impact payments available?
Economic impact payments will be available throughout the rest of 2020. Filing your return now will help to expedite any payment you are eligible for.
The details of the Economic Impact Payments and other government aid during the coronavirus pandemic are changing daily. You can get the most current information on economic impact payments, unemployment benefits and tax relief related to COVID-19 from the IRS. They will post all key information on irs.gov/coronavirus as soon as it becomes available.
Jonathan Medows is a New York City-based CPA who specializes in taxes and business issues for freelancers and self-employed individuals across the country. He offers a free monthly email newsletter covering tax, accounting and business issues to freelancers on his website, http://www.cpaforfreelancers.com — which also features a blog, how-to articles, and a comprehensive freelance tax guide.