What You Need to Know About the CARES Act Rebate Checks
By now most people have heard about the CARES Act and some are wondering how much they’ll receive from rebate checks. If you fall into this camp, here’s a run-down:
Although social distancing and staying home are good for maintaining the health of the country as a whole, it’s not good for businesses. Many retailers, restaurants, and small businesses are seeing their customers less and less or not at all. In response, many businesses are laying off or furloughing their employees. To lessen the negative impact this is having on the economy, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Will I receive anything?
Among many other provisions, this act states that the government will be providing a certain amount of money to many qualifying citizens to ease their short-term financial burdens. More specifically, individuals who earned up to $75,000 in Adjusted Gross Income (AGI) in 2018 or 2019 are eligible to receive a rebate of up to $1,200. This payment increases to $2,400 for those who file as Married Filing Jointly (MFJ), with an AGI limit of up to $150,000. In addition, the payment amount will be increased by $500 for each qualifying child that you have under the age of 17.
Here’s the catch, if your AGI exceeds the specific threshold for your tax status, then the payment you are eligible for will decrease by $50 for every $1,000 above the limit (or by 5 percent). The thresholds are:
Married Filing Jointly: $150,000
Head of Household: $112,500
Other filing statuses: $75,000
For example, if you are a single taxpayer with one child under 17 and a 2019 AGI of $80,000. You would be eligible for a maximum payment up to $1,200 + $500 = $1,700. However, because your AGI exceeds the $75,000 threshold by $5,000, your rebate will be decreased by $5,000 * 5 percent = $250. Therefore, you would receive a rebate of $1,700 - $250 = $1,450.
In order to receive your one-time rebate payment, you must have a work-eligible Social Security number and you must not be claimed as a dependent. Put another way, if you filed a Federal tax return in 2018 or 2019 and are eligible, you don’t need to do anything else to qualify. You can still receive a rebate payment, even if you don’t typically file a tax return by filing an information return. According to IRS.gov, there will be payments sent out within the coming months based on the most recent information on file regarding your direct deposit and physical address so it’s important to update your information now if it’s changed.
If you anticipate a significant change in income for 2020 compared to 2018 or 2019, you may want to consider whether filing now is advantageous to you or not. As an example, it may benefit you to file your 2019 tax return sooner rather than later if your income was too high in 2018, but not in 2019. A lower AGI on file may allow for a larger rebate.
What if your income increased in 2020 and you receive a larger rebate than you should? As it stands currently, there is no measure in place to recover excess funds that are disbursed, so you would get to keep the full amount under the existing rules.
If your situation changes in 2020, (for example, you had a baby or your high 2019 income has since dropped), you may have to wait to receive the full benefit you deserve until you file your 2020 taxes. This won’t be of much benefit to you now but know that you should have the opportunity to claim your funds in the future.
How will I receive my rebate money?
It will be deposited into your bank account or mailed to your address listed on your most recent tax return.
If your direct deposit information has changed, use the Get My Payment application on the IRS website to let them know your new bank account information. This will only work if the IRS doesn’t have your direct deposit information and they haven't sent your payment yet.
If you don’t file a tax return and receive Social Security then the IRS will use your direct deposit information associated with your Social Security income.
The IRS also states they will mail you a letter within 15 days after the payment is paid to your address of record. This letter will provide information on how the payment was made and how to report any issues if you don’t receive the payment.