IRS Economic Impact Payment

On March 27, 2020, the federal government passed the Coronavirus Aid, Relief, and Economic Security (Cares) Act (“the Act”). The Act provides, inter alia, for a one-time payment to be made from the United States Treasury to qualifying legal permanent residents and/or American citizens—referred to as the Economic Impact Payment (“Payment”).

Eligibility for the Payment: To receive the Payment, a taxpayer must either be a legal resident or an American citizen. The taxpayer must have their 2018 tax return on file with the Internal Revenue Service (“IRS”); 2019 tax return is optional at this point since the tax filing deadline has been extended to July 15, 2020.

Amount of the Payment correlates with Income and Filing Status:

Individual (Single Taxpayers) Individual taxpayers will receive up to $1,200 from the IRS—if their adjusted gross income is $75,000 or less (for either 2018 tax return or 2019 tax return, if already filed). Please note that adjusted gross income must be $75,000 or less; it does not refer to net income or overall income. For example, taxpayer A earned $125,000 in 2019. After deductions and credits, taxpayer A’s adjusted gross income was $75,000 on 2019 tax return. In this instance, taxpayer A qualifies for the Payment in the amount of $1,200.

Phase Out for Individual Taxpayers: For individual taxpayers with an adjusted gross income over $75,000, the Payment amount is reduced by $5 for each $100 over the $75,000. For example, taxpayer B’s adjusted gross income for 2019 tax year is $75,300. Here, taxpayer B will receive the Payment in the amount of $1,185—reduced by $15 since the adjusted gross income was $300 more than the qualifying amount of $75,000. Individual taxpayers with an adjusted gross income of $99,000 or more with no children will not be eligible for the Payment. Joint Taxpayers (Married Filing Jointly) Joint Taxpayers will receive up to $2,400 from the IRS—if their adjusted gross income is $150,000 or less (for either 2018 tax return or 2019 tax return, if already filed). Please note that adjusted gross income must be $150,000 or less; it does not refer to net income or overall income. For example, taxpayer C and D earned $185,000 in 2019 (combined income of both spouses). After deductions and credits, taxpayer C and D’s adjusted gross income was $150,000 on 2019 tax return. In this instance, taxpayer C and D qualify for the Payment in the amount of $2,400.

Phase Out for Joint Taxpayers: For joint taxpayers with an adjusted gross income over $150,000, the Payment amount is reduced by $5 for each $100 over the $150,000. For example, taxpayer E and F’s adjusted gross income for 2019 tax year is $150,300. Here, taxpayer E and F will receive the Payment in the amount of $2,385 because E and F’s Payment is reduced by $15 since their adjusted gross income was $300 more than the qualifying amount of $150,000. Joint taxpayers with an adjusted gross income of $198,000 or more with no children will not be eligible for the Payment.

Additional Payment for Parents Both individual and joint filers are eligible to receive $500 for each qualifying child. This $500 per child Payment is in addition to and separate from the Payment based on adjusted gross income. For example, an individual taxpayer with a child reports an adjusted gross income over $99,000. Here, this taxpayer does not qualify for any portion of the $1,200 Payment. However, since this taxpayer has a child; a one-time Payment of $500 may be made by the IRS.

For questions or inquiries, please contact Singh Tax Services at (661) 599-8884 or email us at singhtaxcenter@gmail.com.

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