This letter is to clarify the purpose and workings of the Economic Stimulus Payment coming from the federal government. If lots of numbers and technical language snares your thinking, skip to the last paragraph. And don’t worry, this payment is a good thing.
Some Franklin County residents received their Economic Stimulus Payment last weekend. Others will get them shortly. These payments are from an appropriation made by the federal government and are being sent out to taxpayers at addresses found on their 2019 tax returns. This payment is actually based on an estimated tax credit for 2020, equal to $1200 for individuals, $2400 for filers who do a joint return and $500 for each qualifying child of a taxpayer. The tax credit is refundable. It is an advance payment of the credit due on the 2020 tax return. So the federal law is for credit due the tax payer based on 2020 income. The ‘advance payment amount’ is the amount that would have been allowed as a credit in 2019, if the credit provision had been in effect for 2019. The law treats a credit for 2019 as an over payment that the IRS will rebate as soon as possible in 2020.
Who are we talking about? The term ‘eligible individual’ is any individual except a non-resident alien, or an individual for whom a dependency deduction is allowable to another taxpayer for the tax year. The term ‘qualifying child’ means a dependent child of a taxpayer, when the child is under age 17. Estates and trusts are not eligible for the credit. Children who can be claimed by their parents are not eligible for the credit, even if they have enough income to be required to file a tax return. These rebates are fully available to residents of US Territories and Puerto Rico.
How much money are we talking about? A married couple with two children under age 17 and a gross income below the $150,000 phaseout threshold would receive a credit of $3400. There’s no minimum income. For taxpayers with no income or with income totally from non-taxable benefit programs like SSI, they will still be eligible for the credit with its advance rebate. The amount of the credit is reduced by 5% (but not below zero) of the taxpayers adjusted gross income in excess of $150,000, or $112,500 for head of household with one child, or $75,000 for all other taxpayers. The credit is completely phased out for single filers with AGI of $99,000, and for joint filers with no children and AGI of $198,000. For heads of household with one child the credit is completely phased out when AGI exceeds $146,500.
How do we qualify? Most people won’t have to do anything to get this advance payment. The IRS will calculate and send the payment as soon as possible. And in fact many Franklin County taxpayers have already received their payment. For individuals who haven’t yet filed their 2019 taxes, the IRS will determine the amount of the rebate based on 2018 income, and make a payment to the taxpayer on that basis. The IRS may make a rebate using a direct deposit account, which was authorized by the payee on or after January 2018. The IRS is arranging a web portal for taxpayers to provide their banking information so direct payments can be received instead of waiting for checks by mail. The IRS must send a letter by mail no later than 15 days after the payment was made, to inform the payee how the payment was made. No rebates will be made after December 31, 2020. The amount of the credit allowed in 2020 must be reduced (but not below zero) by the payments allowed to the taxpayer during 2020.
This money is intended to spark the economy back into action and to meet the desperate housing and food, energy and other needs faced by Americans during this difficult time. You should be receiving this payment very soon. If it has not already appeared in your bank account by electronic deposit, then watch for the letter from the federal government explaining how your payment was made. If you have questions, go to your tax preparer.
Good luck. Keep washing your hands.