Stimulus Payments and the CARES Act:
Questions and (Some) Answers
We have been inundated with information about the CARES Act stimulus checks that began to be distributed by the federal government earlier this week. Some of the information we received back when the legislation was passed later proved to be incorrect, and we have found that the terminology and acronyms used with government benefit programs – mind numbing on a good day – lead to confusion on the part of clients and colleagues alike.
Thus far, most questions revolve around how payments will be made, when the funds will be received, and whether recipients who are participating in various government benefit programs need to take proactive steps with the funds in order to maintain program eligibility.
While information continues to come at us fast and furious, we wanted to provide our readers with our current understanding of the “who, when and how” of the stimulus check payment process.
“Who?” – Who is eligible to receive the federal stimulus checks?
U.S. residents will receive stimulus checks (called “Economic Impact Payments”) of $1,200 for each person whose 2019 tax return (or 2018 if 2019 has not yet been filed) was filed as an individual or head of a household, and $2,400 for married couples filing jointly. No one who is claimed as a dependent on another’s return will be eligible.
Recipients must have an eligible Social Security Number, and will be subject to the following adjusted gross income (“AGI”) limits:
* $75,000 for individuals,
* $112,500 for head of household filers, and
* $150,000 for married couples filing joint
Taxpayers will receive a reduced payment if their AGI is between:
* $75,000 and $99,000 if filing status was single or married
* $112,500 and $136,500 if filing status was head
of household, or
* $150,00 and $198,000 if filing status was married filing
The amount of the reduced payment will be based upon the taxpayer’s specific adjusted gross income, so payments will vary from taxpayer to taxpayer falling in one of these ranges.
Retirees and recipients of Social Security Retirement, Railroad Retirement, Social Security Disability or Veterans’ Benefits can receive a payment (so long as their AGI falls within or below the ranges listed above).
Taxpayers who do not have enough income to require the filing of a tax return will also be eligible for the payments, including those whose income comes entirely from benefit programs like the Supplemental Security Income (SSI) program.
Finally, taxpayers can receive an additional $500 per “qualifying child” who is under the age of 17. Note that this additional $500 payment is also subject to the income limitations listed above.
Who is not eligible?
Individuals who can be claimed as a dependent on someone else’s return, such as a child, student, or older dependent (such as an aging parent who might be claimed on an adult child’s return) will not be eligible for the payment.
Individuals who are non-resident aliens or do not have a valid Social Security Number will not be eligible.
Finally, as explained above, high income taxpayers will not qualify for Economic Impact Payments if their income exceeds the following thresholds:
* $99,000 if your filing status was single or married filing
* $136,500 for head of household
* $198,000 if your filing status was married filing jointly
“When” – When will those eligible receive a stimulus payment?
The IRS announced that payments would begin being direct deposited or mailed within the first three weeks of April. Some of our own staff members who filed their 2019 income tax returns have already received direct deposit of their stimulus funds, so we know that the program is operational.
We understand that paper checks were being mailed out beginning April 15th.
“How” – What does one need to do in order to receive a stimulus payment?
For many of our clients and families, the single biggest question we are hearing is, “What do I have to do to get my check?” The answer is, “It depends.”
The intention with the stimulus program is clearly to get the payments into recipients’ hands, and fast. But as we mentioned at the outset, official instructions on the “how” continues to change. From what we have seen from the IRS and in statements from federal officials, many who are developing the system for distributing Economic Impact Payments had a limited understanding of the means tested programs that support individuals with disabilities.
For example, it seemed that program officials didn’t realize that an individual could receive a combination of federal benefits like Social Security Disability and SSI without having to file a tax return and provide bank routing information where tax refunds (and thus stimulus payments) could be direct deposited.
If an individual has not filed a tax return in years, how do federal officials get the Economic Impact Payments to him? Does he have to take affirmative steps to request the payment, or should he rely on the system to track down his government benefit information so that he will receive his payment in a similar fashion? The answer to that question continues to change as the system adapts. For now, this is what we know:
1. Taxpayers who filed 2018 or 2019 income tax returns and included direct deposit information on their returns will have their payments automatically deposited by the IRS in the coming weeks and no additional steps are needed.
2. Taxpayers who filed their 2018 or 2019 income tax returns and did not include direct deposit information on their returns will receive a paper check to the address of record on the return. In addition, the IRS has implemented a
“Get My Payment” Tool on its website (https://www.irs.gov/coronavirus/economic-impact-payments) which allows an individual to confirm her identity and provide direct deposit information in an effort to receive payments more rapidly.
This site can also be used by any filer who had an income tax refund advanced and placed on a refund credit or debit card such as an H&R Block or Turbotax card. This site will allow the filer to provide the IRS with her own direct deposit information in order to expedite the release of the funds into a designated checking account rather than wait for the issuance of a new refund credit or debit card by the tax preparer.
3. Individuals who receive Social Security Retirement, Disability, Survivors, or Childhood Disability (Disabled Adult Child) benefits and who do not have qualifying children under age 17 will automatically receive the $1,200 payment, so long as an SSA-1099 was received for 2019. If the recipient’s Social Security benefit is directed deposited, the payment will be direct deposited as well.
4. Individuals who receive Supplemental Security Income (SSI) benefits and who do not have qualifying children under age 17 will (as of April 15, 2020) automatically receive a payment, directly to their bank accounts through direct deposit, Direct Express debit card, or by paper check, just as they would normally receive their regular SSI benefit. Treasury anticipates that SSI recipients will receive these payments no later than early May. People in this category do not need to take any additional steps to receive payment.
5. Individuals who receive Social Security Retirement, Disability, Survivors, or Childhood Disability (Disabled Adult Child) benefits and who do have a qualifying children under age 17 should go to https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here and be prepared to provide information about their qualifying children: full names, dates of birth and Social Security Numbers, a mailing address and bank account type, account number, and routing number. By doing so, they should also receive the $500 per dependent child payment at the same time and in the same manner as the $1,200 individual payment. Otherwise, these recipients will have to wait to receive the $500 per qualifying child payment.
6. Individuals who Receive Supplemental Security Income (SSI) and who do have qualifying children under the age of 17 should also go to https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here and be prepared to provide information about their qualifying children: full names, dates of birth and Social Security Numbers, a mailing address and bank account type, account number, and routing number. According to the IRS, if SSI recipients with qualifying children do not provide this information soon, they too will have to wait to receive their $500 payment per qualifying child.
Will I get the extra $500 payment for my dependent child?
To be considered a “qualifying child” for the purpose of additional payment, the child must be younger than 17 years-old. The child must also be related by blood, marriage, or adoption. There is no limit to the number of dependents who can qualify for the additional $500 in one household.
This age limit is different than that which is used by the IRS for income tax purposes, where the child must be younger than 19 years old or be a “student” younger than 24 years old as of the end of the calendar year. This different definition has led to confusion, with some trying to claim this payment on behalf of children who do not qualify. So just remember that if your child or eligible dependent is 17 or over you cannot claim the dependent payment for them, and if that child is also claimed as a dependent on a parents’ personal return, the child cannot claim it either.
Please note this additional payment is not a payment based on who is claimed as a dependent; it is for dependent children who are under the age of 17 only. Taxpayers with adult dependent children or with dependent parents or other relatives will not be entitled to the additional $500 payment.
Is the Economic Impact Payment taxable, and do I have to pay it back?
Economic Impact Payments are not taxable and they will not have to be paid back.
For those who receive Supplemental Security Income (SSI) or Medicaid benefits, will receipt of the Economic Impact Payment impact eligibility for these programs?
The actual language of the CARES Act states : “Notwithstanding any other provision of law, any refund (or advance payment with respect to a refundable credit) made to any individual under this title shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds.“
In plain English, this means that Economic Impact Payments received by an SSI or a Medicaid recipient will not count as income for eligibility or spend down purposes in the month it is received, and will not count as a resource for a 12 month period after receipt (it will be “disregarded” for eligibility purposes).
In order to get the benefit of the full 12 month disregard, benefit recipients (or their representative payees, agents or guardians) may wish to segregate these funds into a new account and not commingle them with other funds or assets. This could be important in those cases where an individual does not regularly spend his or her normal SSI payment and those funds accumulate over time.
We sometimes see this with clients who live in congregate residential settings, whose primary needs are met, who cannot express their preferences for use of discretionary funds, and who do not have family members or other advocates to make spending recommendations.
If this is a concern, these individuals (or their representative payees, agents or guardians) may wish to investigate the use of ABLE accounts or pooled supplemental needs trusts to allow the funds to be held for a period beyond the 12 month disregard, to be used at some future point in time when the need arises.
Not for Profit Highlight
In this edition of the Special Needs Estate Planner, we wanted to draw your attention to Saratoga Bridges. For the last 9 years we have had the honor of sponsoring the Annual Autism Awareness Expo and Art Exhibit organized by Saratoga Bridges and their partners. Due to COVID-19 this year’s Expo had to be cancelled, but Saratoga Bridges is already in the planning phases for next year. And while the Art exhibit won’t be on display in the City Center this year, it will be on display on Saratoga Bridges website and Facebook page. Be on the lookout in the next couple of weeks for examples of the amazing artwork created by individuals who are supported by Saratoga Bridges and others.
For those individuals and families who were hoping to access the disability-related resources available at the Expo, Saratoga Bridges has compiled information about the organizations who were planning to exhibit and will make available on their website in early May. You can visit: https://saratogabridges.ejoinme.org/AutismExpo2020 to learn more.
For those of our readers who don’t know Saratoga Bridges, for over 60 years, the agency has been providing the highest level of care for individuals with disabilities.
The COVID-19 crisis has challenged so many individuals and families, and Saratoga Bridges was not spared. The agency implemented many new protocols to protect their staff and the individuals served by their programs, and reports that the spread of the virus within the organization has been minimized. However, the mandate to wear Personal Protective Equipment (PPE), to have vital supplies and to incorporate additional cleaning practices has resulted in expenses they could not have planned for.
How can YOU help? You can make a gift that will allow Saratoga Bridges to purchase the necessary resources to ensure that individuals with disabilities and dedicated staff members are healthy, safe, connected, creative and happy. To help, you can visit Saratoga Bridges.
In addition, you could donate PPE, gift cards for arts & crafts and recreational equipment, homemade masks for staff to wear outside of work or send cards to show your support. Please contact Kelly Armer at email@example.com or call 518-587-0723 ext. 1266 for more giving options or additional information.