New information continues to unfold as Congress provides clarity on several aspects of the economic impact payments and discusses a potential second round of stimulus checks.
IRS Notice 1444
Under the CARES Act, the IRS deposited or mailed the first round of stimulus payments back in April in the amount of $1,200 per eligible taxpayer, along with an additional $500 per qualifying child. Accompanying this payment, you should have also received Notice 1444 within 15 days of payment receipt. Notice 1444 shows the amount of your stimulus payment and will be used for filing purposes on your 2020 tax return. Please retain or send this notice to us for safekeeping.
As a reminder, the stimulus payment will not be calculated in your taxable income, but rather, it is considered an advance credit against 2020 tax. It will not increase the amount of tax you owe or reduce your refund.
Second Stimulus Payment Timeline
While both chambers of Congress agree that another round of stimulus money is needed to continue economic vitality, they have been deadlocked for weeks looking for an amicable solution to provide funding for this next round.
There is hope that in the coming weeks a bill could pass or a unilateral executive order from the President will occur. At that time, the IRS will most likely use a similar system to send out payments as they used the first time, whereby those who are signed up for direct deposit will see payments first. Checks are typically mailed within a couple weeks after a bill is signed by the administration.
Diverted Payments for Child Support
In the first round of stimulus payments, the IRS diverted a portion of about 50,000 individuals’ stimulus money to pay past-due child support. The organization IRS will soon send “catch up” checks to any eligible spouse who submitted Form 8379, Injured Spouse Allocation with their 2018 or 2019 federal income tax return.
If a taxpayer did not submit the form, the IRS plans to automatically issue the portion of the stimulus payment that was applied to the other spouse’s debt in the near future. The date is still to be determined.
Non-Filers Need to Register
Individuals who do not have a filing requirement are still eligible to receive an economic stimulus payment, but they still must register with the IRS. If a single person recorded income below $12,200 ($24,400 for couples) in 2019, they are not required by law to file tax return. Since these individuals do not typically file, the IRS will need up-to-date information in order to process payment.
Stimulus Checks for Deceased Persons
Over 1 million checks were sent to individuals who passed away, and many family members who received these checks are wondering what to do with them. The IRS has specific guidance on what to do if you received a deceased person’s stimulus payment.
- Uncashed paper checks: Write “void” on the back of the check in the endorsement section. Mail the voided check back to appropriate IRS location based on your state. Include a separate note with the reason for returning.
- Cashed paper checks and direct deposits: If deposited, the IRS requires that the payment is returned by submitting a personal check, etc. to the appropriate IRS location and made payable to the “U.S. Treasury.” Include “2020EIP” and either the deceased person’s social security number or individual taxpayer ID number on the check or other form of payment. The IRS also asks for a brief explanation to be included as well.
Conclusion
According to the IRS, 159 million economic impact payments were sent out to taxpayers, totaling close to $267 billion. This number includes 120 million direct deposits, 35 million paper checks, and 4 million pre-paid debit cards. Stay tuned for more information on the possible second round of stimulus payments to be determined in the coming weeks.
If you have any questions regarding the abovementioned information, please reach out to us at the office at (781) 247-5569 or send me an email at stu@erocktax.com.
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About Stu: With more than 30 years of experience as a tax professional, Stu Steinberg brings a broad depth of knowledge to his work with his clients. Stu founded Erock Tax to help provide tax and financial planning strategies to individuals, families and small businesses and is passionate about empowering his clients through education about their money health. Stu is highly energetic and brings a sense of optimism, creative problem-solving and a deep level of commitment to every Erock client.