It’s not taxable, it’s not a loan, and it’s not an advance on a future refund. And if your income drops this year, you might get more next year.
President Donald Trump signed the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act into law March 27 to stem some of the economic damage done to businesses and people by the coronavirus pandemic.
The largest of its kind in U.S. history — to date — the act authorizes an “economic impact payment,” or so-called stimulus check, to nearly everyone in the country, according to the U.S. Department of the Treasury.
Every U.S. resident who is not a dependent of another taxpayer and who filed tax returns for either 2019 or 2018 will be eligible to receive up to $1,200 individually or up to $2,400 for joint filers, depending on gross income. Immigrants with green cards or H-1B and H-2A work visas are also eligible. Non-resident aliens, temporary or undocumented workers are not.
Those who qualify for a stimulus payment will also be eligible to receive $500 for each qualifying dependent under 17 years old.
People on Social Security will also get paid.
Some language in the CARES act caused confusion about what the payment actually is.
“Social Security recipients who are not typically required to file a tax return do not need to take any action, and will receive their payment directly to their bank account,” Treasury Secretary Steven Mnuchin said in a statement.
Anyone who doesn’t usually file a tax return, such as individuals earning less than $12,200 annually or joint filers earning less than $24,400, can apply for the payment from the IRS online. Non-filers can also get the extra $500 per dependent under 17.
The IRS planned to begin distributing payments electronically in mid-April and by check for anyone without direct deposit in the following weeks, according to its website. It will also launch a “Get My Payment” tracking tool.
Some language in the CARES act caused confusion in the public and press about what the payment actually is. Under IRS rules, it is considered a tax credit from a 2020 tax return and therefore taxable income. But the CARES act also requires that recipients be credited by the IRS as if they had paid the government back for the credit. This means the payment is non-taxable and will not reduce any future tax refund.
Section 6428 (f) of the CARES Act, entitled “2020 Recovery Rebates For Individuals” (pages 146 to 147), states:
“Subject to paragraph 5, each individual who was an eligible individual for such individual’s first taxable year beginning in 2019 shall be treated as having made a payment against the tax imposed by chapter 1 for such taxable year in an amount equal to the advance refund amount for such taxable year.”
Taxpayers will also be eligible for additional stimulus credit in their 2020 refunds if their income falls compared to 2018 or ’19. At the same time, if their income rises in 2020, they will still not have to repay anything or have their refund reduced.
For more information, go to https://www.irs.gov/coronavirus/economic-impact-payments