The CARES Act Frequently Asked Questions (FAQs) Part 1

Providing More Clarity and Details on Specific Benefits

Dear Friend:

This is the first as part of a series of posts to provide clarity and more details on specific benefits that have been made available to many many citizens in the recently passed CARES Act.

The Recovery Rebates are the first area we will address in these emails and here are the Frequently Asked Questions and Answers we have created:

Recovery Rebates

  • Refundable income tax credit against 2020 income of up to $2,400 for married couples filing a joint return. All other filers begin with a refund of up to $1,200. The credit amount then increases by up to $500 for each child a taxpayer has under the age of 17.
  • Who qualifies as a child for purposes of the Recovery Rebates?
    • Answer: Any child who is a qualifying child for the purposes of the Child Tax Credit is also a qualifying child for the purposes of the recovery rebate. In general, a child is any dependent of a taxpayer under the age of 17
  • Are the Recovery Rebates just giving you your 2020 tax refund already owed to you for 2020 early?… then you won’t get a 2020 tax refund when you file next year?
    • Answer: The Recovery Rebates are a brand new fully refundable tax credit that does not affect your other tax refunds or taxes due for 2020.
  • Adjusted Gross Income (AGI) threshold amounts:
    • Married Filing Joint, $150,000
    • Head of Household, $112,500
    • Single, $75,000
    • Payment reduced by $50 for every $1,000 over threshold amounts.
  • How do you know what your Adjusted Gross Income (AGI) is?
    • Answer: For tax year 2018 your AGI is found on Line 7 of Form 1040
    • Answer: For tax year 2019 your AGI is found on Line 8b of Form 1040
  • How are your Relief Rebates calculated if your AGI is above the threshold amounts ?
    • Answer: Payment is reduced by $50 for every $1,000 over threshold amounts up to the phase out limit. At the phase out limit you will receive no Relief Rebate:
      • Phase out Range: Married Filing Joint, $150,000 to $198,000
      • Phase out Range: Head of Household, $112,500 to $146,500
      • Phase out Range: Single, $75,000 to $99,000
  • How do you know what tax year the government will base your recovery rebate on?
    • Answer: If you have not yet filed your 2019 tax return it will be based on your 2018 tax return
    • Answer: If you have filed your 2019 tax return it will be based on your 2019 tax return
    • Answer: If you have filed your 2018 and 2019 tax returns and you are not eligible for the Recovery Rebates (Example: income was higher than phase out range) then you have the opportunity to receive the Recovery Rebates when you file your 2020 tax return
  • Individuals must have a work-eligible Social Security Number (and not be claimed as a dependent), but they do not need to have had a reportable income in 2019 and can also be eligible for other income-benefit programs as well.
  • If you are retired and are on Social Security will you be eligible for a Recovery Rebate?
    • Answer: If you are receiving Social Security benefits you are eligible for a Recovery Rebate even if you did not file taxes for 2018 or 2019. You are subject to the income limits and phase out ranges according to your tax filing status
  • How will you receive your Recovery Rebate check if you are eligible?
    • Answer: If you are receiving Social Security benefits they will deposit your Recovery Rebate in the same bank account as your Social Security benefit
    • Answer: If you received a tax refund via direct deposit for tax year 2018 or 2019 your Recovery Rebate will be deposited in the same bank account as your tax refund
    • Answer: If neither of the above applies to you then your Recovery Rebate will be delivered as a check
  • When will you receive your Recovery Rebate check if you are eligible?
    • Answer: Recovery Rebates will begin going out in the 3rd or 4th week of April

The CARES Act is 880 pages and an estimated $2 Trillion + price tag ($2,000,000,000,000) and include extraordinary public health spending for the COVID-19 pandemic, immediate cash relief for individual citizens, a broad lending program for small business, and, targeted relief for hard hit industries.

Hopefully, this post gave you valuable information specific to the Recovery Rebates. If you have further questions here are some great websites that provide additional details:

Tax Foundation

Senator Grassley from Iowa, comments on recovery checks

Congressional Research Service Report

We’ll continue to go through the 880 pages and communicate further. Please look for upcoming posts on more ‘Frequently Asked Questions’ (FAQs) from us in the near future.

Thank you for reading.

Here’s to everyone’s good health.

Your Client First Team,

Client First is an essential service