By Elizabeth Wulfhorst
Anyone who received a tax refund from the IRS in the past few years has probably noticed a recent deposit into their checking account from the U.S. Department of Treasury. At up to $1,200 per individual, Economic Impact Payments are being distributed as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a bipartisan bill passed by Congress and signed by the president March 27 in the wake of the global COVID-19 pandemic.
The CARES Act provides this stimulus payment on a sliding scale to anyone making less than $99,000 as an individual or $198,000 for joint filers. Families meeting the threshold may also receive an additional $500 per child under 17. The IRS used adjusted gross incomes and other information from 2019 or 2018 tax filings to determine the amount of money each individual or family receives.
While direct deposits went out nearly two weeks ago, those expecting paper checks are still waiting. You can check your status on the irs.gov website if you have not received your payment yet.
Whether or not you received the money yet, you may still be wondering how and when you are allowed to spend it.
Kevin Muldowney, CPA, a senior manager with the David M. Muldowney, Jr., CPA accounting firm in Colts Neck, said there are no tax implications from money received in the stimulus payment. “You’re not going to have to pay it back. You’re not going to have to pay tax on it,” he said.
The Economic Impact Payment “is essentially an advance on a tax credit that’s going show up on your 2020 return to be filed in 2021,” Muldowney explained.
If you didn’t qualify for a stimulus payment based on your 2019 income, but would qualify in 2020, you’ll get the tax credit when you file next year, he said.
And if you haven’t filed your 2019 tax return yet, don’t panic.
In addition to direct economic relief, the CARES Act also pushed the traditional tax filing deadline back from April 15 to July 15, giving individuals more time to file their 2019 returns.
If you will owe the IRS, this provision gives filers “three extra months to make a payment without incurring any penalties,” Muldowney said. If you make estimated payments, those due dates have also been revised; first and second quarter payments are both now due July 15.
The revised deadline has given the firm a chance to help their clients wade through all the information in the CARES Act and assist with things like applying for Payroll Protection Program loans, another provision of the act.
They were “kind of ecstatic” when they heard the news of the filing extension, Muldowney said with a laugh. While the firm already had a lot of their clients’ tax return documents, “it relieved a lot of the pressure” to get filings completed by April 15 in the wake of the shutdown.
For now, the office is taking all necessary precautions and following recommended guidelines to keep employees and clients safe. There are only three people coming into the office regularly who are following social distancing rules, with everyone else working remotely. There is a secure box outside the office for clients to drop off documents if they are not tech savvy or don’t feel comfortable using the firm’s secure online portal, Muldowney said. And they aren’t holding any in-person meetings; everything is being accomplished by email or over the phone.
For those who haven’t filed their 2019 tax return yet but expect a refund when they do, not to worry: The IRS appears to be processing refund checks at its normal rate, according to Muldowney.
The article originally appeared in the May 7th – May 13th, 2020 print edition of The Two River Times.
