In a unanimous 96-0 vote, the U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that will provide an unprecedented amount of relief to U.S. residents and businesses.
The legislation still needs to be passed by the House and signed into law by President Trump. All indications are this bill has the support of the House and the President and should become law in a few days.
Since many small marketplace sellers are individuals that use the income from eBay, Etsy, Amazon, and others to supplement income, let’s dive into a vital part of this legislation that provides direct payments to eligible U.S. citizens and residents.
The information is tentative as implementation by the IRS is required and may change timelines and processes.
However, this information is the best understanding of what is known today from the bill as it was passed by the U.S. Senate. We will update this post with more details and information as they become available.
How Much Will I get?
- Individuals who made less than $75,000 in 2019 will be eligible for the full payment of $1,200.
- Individuals who filed as “head of household” and earned less than $112,500 will be eligible for the full payment of $1,200.
- Couples who filed jointly and made less than $150,000 will get $2,400.
- Individuals that made more than $75,000 (not “head of household), but less than $99,000, the payment will be reduced by $5 for every $100.
- Couples that made more than $150,000, but less than $198,000, the payment will be reduced by $5 for every $100.
- Every child in the household will also get $500.
The maximum amount a family can receive is $3,400 (Couple plus four children)
Threshold amounts are based on adjusted gross income (Line 7 on Form 1040 tax return in 2018, or line 8B on a 2019 return).
What Tax Year is The IRS Using to Determine Eligibility?
Depends. If you filed your 2019 taxes, the IRS would use the 2019 tax year. If you have not filed 2019, the IRS will use the 2018 tax year to determine eligibility.
The Treasury Department already delayed the 2019 tax filing deadline of April 15 tax to July 15 due to the COVID-19 emergency.
When Will The Direct Payments Arrive?
Treasury Secretary Steven Mnuchin said he would like to get the payments out within three weeks after the bill passed. There had been a date of April 6 at one point, but that seems unlikely.
Also, the payment method, direct deposit or check will impact when the money arrives. Those taxpayers that filed their taxes in 2018 or 2019 (not technically due yet) and provided the IRS with banking information will be the earliest ones to receive the direct payment.
The Treasury Department plans to run a public awareness campaign that includes information about the program for people who didn’t file a tax return in 2018 or 2019.
Update 3/30/2020: Mnuchin told CBS’ “Face the Nation” there will be a web-based application for those who don’t receive direct deposit to give the IRS the necessary banking information.
How Many Payments Will be Made?
One. This bill only covers one payment, but House Speaker Pelosi suggested in a T.V. interview with CNN that “We think we’ll get more direct payments in another bill.”
Will I Get a Check or Direct Deposit?
That will depend if the IRS has your banking deposit information from your tax return filings in 2018 or 2019.
If the IRS does not have that information, it can mail a check to your “last known address.” Typically, the IRS has 15 days to notify you of the method and amount of the payment.
For people who do not receive a payment, the IRS will soon provide contact information for them to receive help in getting their payment.
Anyone that has moved in the last two years and has not provided the IRS with banking information from the 2018 or 2019 tax returns should contact the IRS to update their information.
I Am a Social Security Recipient and Do Not Need to File a Tax Return Because My Total Income is Too Low. Do I Get a Payment?
Yes. As long as you received Form SSA-1099 for the year 2019 from the Social Security Administration.
I Am a Disabled Vet and Do Not Need to File a Tax Return. Do I Get a Payment?
Yes. The IRS is working on a plan to handle this situation to ensure that disabled vets receive this payment.
I Am a College Student. Do I Get a Payment?
Depends. If your parents claim you as a dependent on their taxes, you’re are not eligible. However, working students that file taxes independently should qualify.
I Made Too Much Money in 2019, But Will Be Below The Threshold in 2020. Do I Get This Payment?
You will have to wait until you file your 2020 tax return to find out if you are truly eligible and the IRS will not send out a payment now.
I Live In a U.S. Territory Such as Puerto Rico. Do I Get This Payment?
Yes, legal residents of U.S. Territories are eligible to get this payment?
Do Non-American Citizens Qualify For This Payment?
Depends. You must have a social security number and be legally in the United States. Typically this includes U.S. Permanent Residents (Green Card Holders) and resident workers on special visas such as H-1B and H-2A.
Visitors and persons not legally in the United States are not eligible.
Will I Have to Pay Taxes on The Payment?
No. But check your 2020 tax forms if this payment may have to be disclosed.
I Do Not Have a Permanent Address as I Am Homeless. Do I Get This Payment?
Yes, the IRS is working a process for people who do not have a permanent address or who just got out of jail to receive this payment.
I Owe Back Taxes. Do I Get This Payment?
A little unclear at the moment as the bill doesn’t exclude people who owe money to the IRS from receiving the payment. But the IRS is still working on the details.
Coronavirus Aid Direct Payments Bottom Line
The IRS will send out payments to those it can quickly identify as eligible for the payment.
Some taxpayers may find themselves stuck as their 2018 income would have made them eligible, but their 2019 income does not. Those taxpayers should contact their accountant to discuss tax strategies about this issue.
We will update this post as new information becomes available or existing information is clarified.
For many small business owners, this is welcomed relief as they face tremendous hardships due to the COVID-19 emergency that required many businesses to close or lose sales online.
Do you like this emergency direct payments plan, and do you think more will be required before it is all over?
Please use the comments section below or head over to our Facebook Group for Small Business Sellers and interact with other small business owners.