Coronavirus Aid, Relief and Economic Security (CARES) Act. In response to the economic harm that the COVID19 virus has caused, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020. The Act provides an estimated $2 trillion in assistance, including almost $500 billion in individual rebate checks. Another $500 billion to support businesses and industries that have seen their operations affected and $400 billion in tax credits to businesses for wages and payroll tax relief. Lastly, $300 billion to support various state and local governments and $150 billion to support the health care system.
Recovery Rebates are payments made directly to individuals and families below certain income thresholds. This rebate is an advance refund, a newly created 2020 tax credit. The rebate amounts of $1,200 for an individual; $2,400 for a married couple. $500 for children under the age of 17 will be available to:
- Single filers whose adjusted gross income (AGI) is less than $75,000
- Joint filers with AGI less than $150,000
- Head of household filers with AGI less than $115,500.
What about taxpayers with AGI above the threshold amounts?
Based on a phase out formula, the rebates will be completely phased out for single filers with AGI of $99,000, joint filers with AGI of $198,000 and $136,500 for heads of households. Taxpayers with children will be subject to higher AGI limits before the rebate is completely phased out.
What if the taxpayer’s income drops below the AGI threshold in 2020, even if your income was too high for the cash flow assistance provided by the immediate cash payment?
While people in this situation will not receive the immediate help a credit will be available later, nonetheless. Conversely, if your income was low enough to qualify in 2018 or 2019 but your income was above the threshold in 2020, the tax credit will NOT be called back when your 2020 return is filed. The Treasury Department indicates that the “as soon as possible” guidance provided by the Act probably means payments will go out to taxpayer’s in May. The Act indicates that the IRS will send a confirmation letter within 15 days of having made the payment. The confirmation letter will also provide a phone number to report any payment issues.