Below is a list of Frequently Asked Questions regarding the CARE Act and its recovery rebate payouts for Americans economically impacted by COVID-19, or coronavirus.
Who is eligible for a recovery rebate? U.S. residents with adjusted gross income under $75,000 ($112,500 for head of household and $150,000 married), who aren’t the dependent of another taxpayer and have a work-eligible Social Security number, are eligible for the full $1,200 ($2,400) rebate. These residents are also eligible for an additional $500 per child. Typical families of four are eligible for a $3,400 recovery rebate.
What about taxpayers with adjusted gross income over $75,000 ($112,500 for head of household and $150,000 married)? Are they eligible to receive any rebate? The rebate is lowered by $5 for every $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is totally phased out for single filers with incomes that exceed $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children. For typical families of four, the amount is totally phased out for those with adjusted gross incomes exceeding $218,000.
What if my income was above the threshold in 2019, but I’ve lost my job due to the corona virus? Can I still get a rebate check? If your 2019 income was in the phase-out range, you would still receive a partial rebate based on your 2019 tax return. However, the rebate is an advance on a tax credit that you may claim on your 2020 tax return. If your 2020 income is lower than in 2019, any additional credit you are eligible for will be refunded or will reduce your tax liability when you file your 2020 tax return next year.
Is the rebate taxable or will I have to pay back any amount if the rebate based on my 2019 return is larger than what it would be if based on my 2020 tax year return? No, the rebate is treated like other refundable tax credits, like the child tax credit or earned income tax credit, and it is not considered income. If the credit amount you qualify for based on 2020 income is less than what you qualify based on your 2019 tax return, it does not have to be paid back.
Who qualifies as a child for purposes of the rebate? Any qualifying child for the purposes of the Child Tax Credit is also qualified for the purposes of the recovery rebate. Generally, a child is any dependent of a taxpayer under 17 years old.
Do dependents, other than children under 17, qualify a taxpayer for an additional $500 per dependent? No. The $500 per child is limited to children under 17.
Are individuals with little to no income or those on means-tested federal benefits, such as SSI, eligible for a recovery rebate? Yes, there are no qualifying income requirements. Individuals with $0 of income are rebate-eligible so long as they are not a dependent of another taxpayer and have a work eligible Social Security number.
Are seniors whose only income is from Social Security or a veteran whose only income is a veterans’ disability payment eligible? Yes, so long as they aren’t the dependent of another taxpayer. The bill provides the IRS with additional tools to locate and provide rebates to low-income senior citizens who normally don’t file a tax return by allowing them to base a rebate on Form SSA-1099, Social Security Benefit Statement or Form RRB-1099, which is the equivalent of the Social Security statement for Railroad Employees. Seniors are still encouraged to file their 2019 tax return to ensure they receive their rebate as soon as possible.
Are college students eligible for a recovery rebate? Only if they aren’t considered a dependent of their parents. In general, a full-time college student under 24 is considered a dependent if their parent(s) provide more than half their support.
I am eligible for a rebate, what do I have to do to receive it? For most Americans, no action will be required to receive a rebate check since the IRS will use a 2019 tax return if filed or their 2018 return if they haven’t filed their 2019 return. This does include many individuals with low-income who file a tax return, despite not owing any tax, in order to utilize the refundable Earned Income Tax Credit and Child Tax Credit.
What should I do if I did not file a tax return for 2019 or 2018? The best way to ensure you receive a recovery rebate is filing a 2019 tax return if you’ve yet to do so. This can be done for free online from home using the IRS’s Free File program. The bill instructs the IRS to engage in a public awareness campaign to alert individuals of their eligibility for the rebate and how to receive it if they haven’t filed a 2019 or 2018 tax return.
If I have a past due debt to a federal or state agency, or owe back taxes, will my rebate be reduced? No. The bill waives nearly all administrative offsets that would ordinarily reduce refunds for individuals with past tax debts, or who are behind on other payments to federal or state governments, including student loan payments. The only offset that will be enforced applied to those with past due child support payments that states have reported to the Treasury Department.