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Are Coronavirus Stimulus Payments Taxable?

Posted by Juda Gabaie | Apr 17, 2020 | 0 Comments

On March 25, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, also known as the “CARES Act.” As part of the CARES Act, many middle and lower income individuals will get a direct payment to help financially deal with the COVID-19 outbreak. The Act will also extend and increase unemployment insurance benefits for those who are out of work. 

Do I Qualify for Coronavirus/COVID-19 Direct Payments?

Individuals who qualify will receive a $1,200 direct payment. Qualifying married couples who file jointly will get $2,400 payments. Families will also receive an additional $500 for each qualifying child under the age of 17. 

Who is Eligible?

Maximum Qualifying AGI

Payment Amount

Individual

$75,000

$1,200

Married Filing Jointly

$150,000

$2,400

Head of Household

$112,500

$1,200

Each Child Under 17

---

$500

To qualify, individuals can have an adjusted gross income (AGI) of up to $75,000. Married couples can qualify with an AGI of up to $150,000. 

If you make over the maximum AGI, you will still be eligible for direct payments. However, the payment amount decreases as the AGI increases. Each $100 over the maximum AGI will decrease payments by $5. The maximum AGI where payments are eliminated are $99,000 for individuals and $198,000 for married couples. 

The AGI is based on your 2019 tax filing, if you've already filed your taxes for tax year 2019. However, if you have not filed your 2019 taxes, qualification will be based on your 2018 tax year filing. If you have not filed 2019 or 2018 taxes, you will still be eligible for a payment as soon as you file a 2018 or 2019 tax return. 

If you are not typically required to file a tax return, including senior citizens, Social Security recipients, and railroad retirees, the IRS may use information from Forms SSA-1099 and RRB-1099 to make payments.

How Will I Get the Coronavirus Stimulus Payment?

The payments will be made through direct deposit to individuals who already have provided banking information to the IRS through a prior tax return, including the account number and routing number to receive a tax refund from a prior year. Individuals who have not provided bank information to the IRS will be able to request payments through an online portal to come. 

Are Economic Stimulus Payments Taxable? 

The short answer is that the payments are not taxable. The COVID-19-related payments have been called stimulus payments, credits, rebates, and refunds. The tax treatment of the money is a bit complicated because of the way the government had to issue the payments under the Internal Revenue Service (IRS) structure. 

The payment is legally considered a tax credit advanced from their 2020 tax return that has not yet been filed. However, the payment does not need to be paid back as part of filing the 2020 return. The tax credit will not reduce the taxpayer's 2020 tax refund and the tax credit is not considered taxable income. Instead, the law provides that the payment will be credited as if the individual had paid back the advance even though they do not pay the money back. In the end, there is no 2020 tax year impact with receiving the payment. 

Filing 2019 Taxes Delayed Until July 15, 2020 

As we mentioned in a prior blog post, the IRS will defer tax payments by 90 days and extend the filing deadline from April 15, 2020, until July 15, 2020. The 90-day extension will be a penalty-free period where taxpayers should not be assessed late filing penalties, interest, or underpayment penalties until after the extension period.

Reliable Tax Attorney for IRS Tax Problems 

If you already owe back taxes or have received a notice from the IRS, talk to an experienced Maryland tax attorney for help. Contact Gabaie & Associates, LLC for a free consultation on your state or federal tax issue at (410) 862-2198.

About the Author

Juda Gabaie

Juda Gabaie Esq. has dedicated his career in defending clients nationwide to resolve tax disputes before the Internal Revenue Service and the state taxing agencies. Juda has represented clients before the US Tax Court, Maryland Tax Court, and Comptroller of MD hearing compliance. As an adjunct prof...

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