As news broke about the possibility of recovery rebates being sent out to Americans as a result of the COVDI-19 crisis, everyone immediately wanted to know when the could expect their checks. Moments ago, the House and Senate both passed the relief bill and it states the following.
Under the bill, advance credit checks will go to qualifying individuals of $1,200, ($2,400 if married filing a joint return) plus $500 for each qualifying child.
The credit is proposed to be reduced, but not below $0, if the taxpayer’s adjusted gross income is in excess of: $150,000 for joint filers, $112,500 for head of household, $75,000 for all other taxpayers.
The credit reduction formula is 5% of the taxpayer’s adjusted gross income in excess of: $150,000 for joint filers, $112,000 for head of household and $75,000 for all others.
Ex: Married Joint, 2 dependent household, with $205,000 of income Credit before phase out would be $1200+1200+500+500= $3,400 Phase out ($205,000-150,000)*.05= $2,750 Credit $650
Treasury will use 2019 tax return data for those returns already filed. If your 2019 return has not yet been filed, 2018 return information will be used. For people not required to file, other government information will be used such as SSI or other exempt income.
For those who have used direct deposit of their refunds, the advance credit will be deposited directly using that information. Treasury then will notify recipients within 15 days of making the deposit.
This is just a short summary of the extensive provisions related to credit rebates. The bill itself is over 800 pages long and we will update you with more information as we work our way through it. If you have any questions about the rebate please do not hesitate to contact our office.
Note to professionals:
It will be important to remember that if the 2018 income qualifies people for the rebate but 2019 income does not, or is phased out, the 2019 return should not be filed until advance payments are received.
It will also be important to remember not scramble to file 2019 returns in situations where 2018 income is in excess of the phase-out because the 2020 return will allow people to take the credit based on 2019 filed data.