The information in this publication is provided only for educational purposes and to inform the reader of relevant topics. This is not to be perceived or utilized as formal tax or legal advice. It is up to the reader to seek the necessary and appropriate tax and legal professionals that specialize in these areas for specific guidance.
About the Program
As part of the $2 trillion economic stimulus package, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted and became law March 27, 2020.1 As a result, many individuals and families are eligible to receive an “Economic Impact Payment” (EIP). In reality, the payments are a tax credit/advanced tax refund provided to the taxpayer for the 2020 year. These payments will be received in the form of a refund of income taxes.
Most individuals will not need to take any action to receive an Economic Impact Payment. This includes senior citizens and others who were not required to file in 2018 or 2019. If the taxpayer has not filed a 2019 tax return at the time of disbursement of the EIP the IRS will use the taxpayer’s 2018 return to determine eligibility. If the taxpayer has also not filed a 2018 tax return then the SSA-1099 (the 1099 that is provided from the Social Security Administration for Social Security payments) or the RRB-1099 (the 1099 that is sent to the recipient of Railroad Retirement Benefits) may be used to determine the payment and its amount.
Individuals who have not filed a 2018 or 2019 tax return and do not receive any Social Security or Railroad Retirement Benefits, should work with a tax professional to determine if filing a tax return will be beneficial.
Please continue to check the IRS website for any updates, changes, and additions.2
Who is Eligible?
Table 1 shows the maximum Adjusted Gross Income (AGI) allowable to receive the maximum Economic Impact Payment.
Table 1. AGI limits for maximum Economic Impact Payment by taxpayer filing status.
|Income Tax Filing as:||Adjusted Gross Income||Maximum Economic Impact Payment|
|Single Individual (S)||< $75,000||$1,200|
|Married, Filing Jointly (MFJ)||< $150,000||$2,400|
|Head of Household (HOH)||< $112,500||$1,200|
The Economic Impact Payment (EIP) will be reduced by 5¢ for every $1.00 that the taxpayer’s AGI exceeds the threshold limit. The threshold limit is an AGI of $75,000 for a single individual taxpayer and $150,000 for Married, Filing Jointly (MFJ) taxpayers. The phaseout of the payments means once a single individual taxpayer’s AGI reaches $99,000 or MFJ taxpayer’s AGI reaches $198,000, they are no longer be eligible for an EIP. Table 2 shows the Adjusted Gross Income levels that make taxpayers ineligible for an Economic Impact Payment. Table 3 shows the Adjusted Gross Income levels that make taxpayers with one child ineligible for an Economic Impact Payment.
Table 2. Adjusted Gross Income level resulting in a zero EIP by taxpayer filing status.
|Income Tax Filing as:||Adjusted Gross Income||Economic Impact Payment|
|Single Individual (S)||≥ $99,000||$0 (Exceeds AGI limit)|
|Married, Filing Jointly (MFJ)||≥ $198,000||$0 (Exceeds AGI limit)|
|Head of Household (HOH)||≥ $136,500||$0 (Exceeds AGI limit)|
How Do Children Affect Economic Impact Payments?
As discussed above, the maximum Economic Impact Payments for eligible taxpayers are:
- Single Individual and Head of Household tax filers may receive up to $1,200.
- Married Filing Jointly may receive up to $2,400 if eligible.
- Parents of qualifying children may also receive up to $500 for each qualifying child:3
- A qualifying child is a child, stepchild, adopted child, or a descendent (including brother, sister, niece, and nephews, etc.) that the taxpayer cares for and is claimed on the tax return.
- The child must be younger than the taxpayer and younger than 19 at the conclusion of the filing year.
- A child that is younger than the taxpayer and younger than 24 if they are a full-time student.
- The child is “permanently and totally disabled” of any age.
Table 3. Adjusted Gross Income Level with one child resulting in zero EIP by tax filer status.
|Income Tax Filing as:||Max. EIC||Adjusted Gross Income||Economic Impact Payment|
|Married, Filing Jointly (MFJ) + 1 Child||$2,900||≥ $208,000||$0 (Exceeds AGI limit)|
|Head of Household (HOH) + 1 Child||$1,700||≥ $146,500||$0 (Exceeds AGI limit)|
As always, please contact your tax advisor for further details or questions about your personal situation. Visit the Clemson Extension Agribusiness Program Team website for additional information as it becomes available on this and related topics.
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act, H.R. 748, 116th Cong. (2020). https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf.
- Economic impact payments: What you need to know. Internal Revenue Service. Washington (DC): IRS. (https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know)
- Qualifying child rules. Internal Revenue Service. Washington (DC): IRS. https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/qualifying-child-rules.
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