Tax Policy – FAQ on Federal Coronavirus Relief Bill (CARES Act)
Congress’s latest coronavirus relief package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, is the largest economic relief bill in U.S. history and will allocate $2.2 trillion in support to individuals and businesses affected by the pandemic and economic downturn. Many people have questions about how the new law impacts their families and businesses.
How much of a rebate will I receive?
Individuals with a Social Security Number (SSN) and who are not dependents may receive $1,200 (single filers and heads of household) or $2,400 (joint filers), with an additional rebate of $500 per qualifying child, if they have adjusted gross income (AGI) under $75,000 (single), $150,000 (joint), or $112,500 (heads of household) using 2019 tax return information. (The IRS will use 2018 tax return information if the taxpayer has not yet filed for 2019.) The rebate phases out at $50 for every $1,000 of income earned above those thresholds.
Use this calculator to determine your rebate using your AGI, number of dependents, and filing status. Back to top
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How do I get my rebate?
For most Americans, no action is required. The IRS will use data from the most current tax returns or Social Security data to provide a rebate to Americans either via direct deposit (if such information is available) or through a paper check in the mail to the last address on file.
U.S. Treasury Secretary Steven Mnuchin said he hopes to distribute rebates to taxpayers who e-filed with direct deposit banking information in three weeks. Taxpayers receiving rebate checks may have to wait six to eight weeks to receive a paper check in the mail.
Treasury will be developing a web-based portal for individuals to provide their banking information to the IRS online. Taxpayers will be able to receive payments immediately as opposed to checks in the mail. Back to top
Can I file taxes now for 2019 and have it applied for rebate eligibility?
Yes. The IRS has recommended taxpayers to e-file as soon as possible if they think they will be owed a refund and has specifically advised taxpayers not to wait until July 15, the extended deadline from the usual April 15 date. Back to top
Is there a way for me to get my check faster?
The IRS has stated that those who filed their taxes electronically and provided direct deposit information will get their money the fastest.
Treasury will be developing a web-based portal for individuals to provide their banking information to the IRS online. Taxpayers will be able to receive payments faster as opposed to waiting for checks in the mail. Back to top
Rebates for Dependents
Is there any minimum income amount to qualify for the rebate and claim dependents?
No, even filers with $0 of income can file for the rebate. However, they must file a tax return to ensure the IRS can process the rebate. Additionally, they must have a Social Security Number and not be claimed as a dependent on another person’s return. Back to top
Which dependents qualify for a rebate?
The CARES Act uses the Child Tax Credit (CTC) eligibility standards. All qualifying children who are under age 17 who have not provided for more than half of their own expenses and lived with the taxpayer for more than six months are eligible. This means that adult dependents, such as college students aged 17 and over, and elderly dependents do not qualify for the $500 rebate. Adult dependents do not qualify for their own rebate either. Back to top
How many dependents can I claim?
The CARES Act does not provide a maximum number of children that can be claimed. However, for each dependent to qualify they must be claimed by the taxpayer on their tax return. Back to top
What if I had a baby in 2019 or earlier this year and haven’t filed a return?
If a taxpayer has not already filed a 2019 return with the name and Social Security Number (SSN) of the eligible dependent being claimed, the filer will not receive credit for those dependents born after they filed their 2018 return. However, the taxpayer may claim a $500 credit for each eligible child on their 2020 return. Back to top
What if I am divorced? Does each parent receive a $500 check for each of their dependents?
Only the parental taxpayer claiming the child as a dependent will receive the $500. Back to top
Rebates and Tax Returns
Tax filing and payments for tax year 2019 have been delayed until July 15. What information will Treasury use to determine my rebate?
Treasury will use tax year 2019 returns if available. If a taxpayer has not filed for tax year 2019, Treasury can fall back on 2018 return information For those relying on Social Security and Veterans benefits but who have not filed in 2019 or 2018, the IRS requires they submit a simplified return to process the rebate (they will owe no tax when filing the simplified return). Back to top
What if I have not filed my taxes for 2019, is there still an opportunity to get my money?
Yes, the IRS will look at your 2018 tax return to check for rebate eligibility but has also advised all taxpayers expecting a refund to file their 2019 tax return as soon as possible. Back to top
If I had high income in 2019 but lost my job, do I still qualify?
If a taxpayer’s high income in 2019 puts them above the threshold, they may be in the phaseout range and remain eligible for a partial refund. If their income is lower in 2020 when they file taxes, any remaining credit that they are eligible for will also be refunded or deducted from their tax liability when they file taxes for 2020. Back to top
What if my income rises in 2020 and I received a higher rebate using my 2019 return?
There is no penalty for receiving a rebate based on a lower income on 2019 or 2018 tax returns. If a filer’s eligible rebate rises when using 2020 tax returns, that will be remedied on their 2020 return. If the filer is given too much, the IRS will not penalize them. Back to top
If my rebate is too large due to dependent eligibility mistakes, will I have to pay it back? Will my rebate be considered part of my taxable income in 2020?
No. Like all refundable tax credits (e.g., Child Tax Credit, Earned Income Tax Credit (EITC)), any part of the rebate, even in excess, is not considered as part of taxable income. Back to top
If my income drops in 2020, can I get additional rebate if I got a lower rebate based on 2019 income?
Yes, if a taxpayer’s income drops in 2020, they will be eligible for any remaining rebate credit they were not able to claim using their 2019 or 2018 return. Back to top
If I make more income in 2020, do I have to pay any amount back?
No, if the amount of credit a taxpayer qualifies for in 2020 is less than it was based on their 2019 return, it does not have to be paid back and it is not considered taxable income. Back to top
How Does Social Security Impact Rebates?
Will those receiving Social Security benefits still receive a rebate check?
Yes, all taxpayers are eligible for the rebate, including those receiving Social Security benefits, subject to the same eligibility rules as other taxpayers. Individuals with Social Security benefits will have to submit a simplified return to the IRS, however. Back to top
Do I still receive a check if I am on disability?
What if I receive Supplemental Security Income but not Social Security benefits? Do I qualify for a rebate?
Yes, taxpayers will qualify for the rebate as long as their Adjusted Gross Income is below the rebate thresholds depending on their filing status. If a taxpayer did not file for taxes in 2018 or 2019, the IRS recommends they do so as soon as possible to ensure they receive the rebate. Back to top
Payroll Tax Changes
Are there limits to the payroll tax credit that employers can apply to 50 percent of employee wages?
Employers may claim a 50 percent tax credit on the wages paid to employees from March 13 to December 31, 2020, up to a maximum of $5,000 credit per employee (applied to $10,000 of employee wages).
To qualify, firms must be suspended due to government actions related to coronavirus or experience a 50 percent decline in gross receipts during a calendar quarter when compared to the same quarter in the previous year. For firms with 100 employees or more, the credit can only be applied to employees not able to do their duties due to a business suspension or a lack of business. Back to top
If a firm is taking a loan through the Paycheck Protection Program, can it also take the payroll tax credit on workers?
If a firm takes a loan through the Paycheck Protection Program, it is not eligible to take the payroll tax credit on up to 50 percent of employee wages. Back to top
What is the difference between the payroll tax credit created for coronavirus-related paid sick and family leave and the payroll tax credit in the CARES Act?
The Families First Coronavirus Response Act created tax credits on employer-side Social Security payroll taxes to offset paid family and sick leave related to the coronavirus.
This credit is different from and unrelated to the 50 percent refundable tax credit on employee wages that firms can receive. The refundable tax credit is not dependent on employees taking qualified sick or family leave and was created as part of the CARES Act. Back to top
Unemployment Insurance Changes
How did the law change one-week waiting periods before filing for unemployment insurance?
The new law incentivizes states to end one-week waiting periods by providing 100 percent federal financing of the first week for states without one-week waiting periods. It will be up to each individual state to remove existing one-week waiting periods. Back to top
Who qualifies for the expanded Pandemic Unemployment Insurance?
Workers must meet these three qualifications: 1) ineligible for any other state or federal unemployment benefits; 2) unemployed, partially unemployed, or cannot work due to the COVID-19 public health emergency; and 3) cannot telework or receive paid leave. This includes workers like those who are self-employed, independent contractors, gig economy workers, and those who do not have sufficient work history to qualify for regular benefits.
These workers are now eligible for a temporary federal program called Pandemic Unemployment Assistance that provides 39 weeks of unemployment benefits. Back to top
How are benefits calculated under these expansions?
The Pandemic Unemployment Assistance benefit amount varies by state, is subject to a minimum, and is augmented by a new $600 weekly boost called Federal Pandemic Unemployment Compensation. The length of benefits is 39 weeks, which reflects the regular 26 weeks provided under state programs plus the temporary 13-week expansion provided by the new federal law. Specifically, benefits are calculated under state law based on recent earnings, with a minimum benefit requirement that is equal to half of the state’s average weekly unemployment compensation amount. Back to top
How does the $600 weekly boost work?
The new law that created the $600 weekly boost is fully funded by the federal government to augment the regular unemployment benefit amount an unemployed worker receives. States are not authorized to reduce the amount or duration of their unemployment compensation during the time of the federal expansion. Back to top
Can someone laid off before the new law was passed qualify for the new benefits?
Yes. The $600 weekly boost will be provided as a supplement to those who are already receiving unemployment compensation at the state level.
Additionally, the newly created Pandemic Unemployment Assistance program provides benefits (including the $600 boost) for unemployment, partial unemployment, or inability to work that began on or after January 27, 2020 and ends on or before December 31, 2020. These benefits can be paid retroactively to those who qualify. Back to top
Is it true that people who were not laid off can also qualify?
In some cases, yes.
Individuals who can provide self-certification that they had to quit for a specific COVID-19-related reason and who do not have the ability to telework with pay, or access paid sick leave or other paid leave benefits, may qualify for Pandemic Unemployment Assistance.
Some of the specific reasons workers could qualify without being laid off include otherwise being able to work except that they are unemployed, partially unemployed, or unavailable to work because of being diagnosed with COVID-19; a family member in their household has been diagnosed with COVID-19; they are caring for a family member with COVID-19; or they have to care for their child whose daycare or school is closed due to COVID-19. Back to top
Who determines if I qualify for the benefits?
State departments of labor will administer the expanded benefits as well as their existing benefit programs. Workers will need to file a claim with the unemployment insurance program in the state where they worked, and the states will determine whether workers qualify for benefits.
The U.S. Department of Labor has more information here and here, and advises, “For now you should file for benefits as directed on your state’s website and look for information about how to receive future updates.” Back to top
How long do these benefits last?
The federal expansion provides 13 “extra” weeks of benefits, meaning that in total, workers can qualify for up to 39 weeks of unemployment benefits during the COVID-19 public health crisis (26 weeks under state programs, plus 13 additional weeks provided by the federal government).
Federal expansions including the extra 13 weeks, the extra $600, and the extension to workers who previously didn’t qualify will be in effect through December 31, 2020. Back to top
Are the new benefits taxable?
Yes. Regular unemployment insurance is counted as income and taxed on individual tax returns, and these expansions of unemployment insurance are likewise counted as income and taxable. Taxpayers will be required to disclose all of their unemployment insurance benefits when they file their taxes. Back to top
Source: Tax Policy – FAQ on Federal Coronavirus Relief Bill (CARES Act)