Economic Impact Payments
I got mine. So I can answer one question—no, the IRS is not going to “do the math” to see if your dependent child who was eligible for the Child Tax Credit (CTC) in 2018 or 2019 is going to be eligible in 2020. You will get the additional $500 payment if the child was CTC eligible (age 16 or under) on your most recently filed return. Every now and then my procrastination pays off. I’m pretty sure I’ll be filing my personal 1040 on July 14th.
Moving forward, and I am advising individual clients as their returns are prepared, I will be either filing immediately or recommending that you wait until you receive your Economic Impact Payment (EIP or ‘stimulus check’) to file your 2019 return. The recommendation will be based on whatever is most advantageous for you. I have already advised some clients whose income was higher in 2019 than it was in 2018 to wait to file their 2019 return until they receive their EIP. I’ll be doing the same for clients with kids who were 16 in 2018. It’s called “tax planning” and it’s one of the reasons you pay a #taxpro.
Non-filers (you aren’t required to file a return, not that you simply haven’t filed a return)
If you aren’t a client, or if you are a former client who dropped below the threshold for having to file a return, you have a couple of options depending on your individual circumstances:
- If you receive Social Security payments your EIP will be automatic. You will receive a direct deposit or a check without having to take any additional steps.
- If you don’t receive Social Security payments but you get, for example, SSI or VA payments and are still not required to file a return the IRS is providing a tool for you to enter the information necessary for you to receive your EIP.
It is important to remember that you should, under no circumstances, have to pay to receive your EIP. For best results always start at irs.gov or irs.gov/coronavirus, not Google. And watch out for phone calls and e-mails phishing for information as well. The scammers are out in force on this one.
Filers Who May Not Have Direct Deposit Information on File or Want to Update Their Direct Deposit information
According to Kelly Phillips Erb (aka The Tax Girl) in this Forbes article, the Treasury Department has created a new web tool for filers of 2018 or 2019 tax returns to input or update their direct deposit information (a whole two days before the #taxpro community expected it!). This tool can be used if you normally don’t get a refund, but rather, have to pay the IRS each tax season. You can use this tool to verify the amount of your EIP, confirm whether it will be direct deposit or check, and (if you are getting a paper check) enter direct deposit information to receive your payment more quickly as long as your check hasn’t already been mailed. Paper checks aren’t supposed to start being mailed until the end of this month or early May according to my most recent reading. You can also update your direct deposit information if your deposit isn’t already pending.
You need to have your most recently filed tax return in hand to answer some of the questions. If I prepared your return it is likely that the information the tool will be requesting will be on your COMPARE sheet (that handy three-year comparison that is usually at or near the top of the left-hand pocket of your tax folder).
Update! Word on the street (OK, on #TaxTwitter) is that the tool is not working correctly. Especially if you have not filed a 2019 return. Please be patient and check back once or twice a day. They will get it running eventually. Or I’ll post that they’ve scrapped it.
Finally, according to The Tax Girl:
For security reasons, the IRS plans to mail a letter about the economic impact payment to your last known address within 15 days after the payment is paid. The letter will provide information on how the payment was made and how to report any failure to receive the payment.
Based on my reading there are a host of complicating factors for economically vulnerable taxpayers, taxpayers who file injured spouse claims (one taxpayer of a married filing joint couple owes back child support and the other doesn’t), divorced taxpayers, etc. I’m not going to go into the weeds on those. If you are interested, I highly recommend the Procedurally Taxing Blog, but beware, the blog is written for tax attorneys and is not for the faint of heart. Nevertheless, several recent posts discuss some of the complicating factors in mostly plain language.
And that, taxpayers, is all I have to say about that. So, moving on…
As I already reported, the filing and payment deadline has been extended to July 15th. Pretty much all of the deadlines significant to my practice (including those for filing Tax Court petitions) have been extended. If you have to file an FBAR you have an automatic extension until October 15th. The good news is that the IRS recently clarified that the July 15th deadline specifically applied to taxpayers required to file a Form 8938 (for certain taxpayers with foreign bank account balances). Estate income tax returns as well as estate and gift wealth transfer tax returns have also, for the most part, been granted extended deadlines.
The one tiny bit that was still weird has also been fixed! All of the extensions resulted in Quarter 1 estimated tax payments being due after Quarter 2 payments were due. Until recently Quarter 1 payments were due on July 15th but Quarter 2 payments were still due on June 15th. That has been fixed. Now all balances due on 2019 returns as well as Quarter 1 and Quarter 2 estimated tax payments are due on July 15th (as of this writing). That’s good news and bad news. Yes, everyone has more time, but that does make it easier to forget about payments and to, perhaps, lose sight of just how much will be due in total on July 15, 2020. Consequently, I am encouraging all taxpayers with the means to do so to make their payments on time and/or to set calendar reminders with amounts due to ensure that those payments get made by the new deadline.
And speaking of payments…
If you are in an existing Installment Agreement with the IRS your payments have also been suspended. If you mail them a check, you can stop until July 15th. If you are in a direct debit agreement you need to contact your bank and ask them to suspend the payments temporarily. It is extremely important that you ensure that you direct the bank to reinstate your payments approximately two weeks before the first payment due after July 15th to ensure that you don’t default your agreement. I expect the IRS to be fairly graceful about this given the circumstances, but it’s always better not to count on that grace. And again, if the payments are not causing economic hardship, I certainly recommend that you continue to make them even though you don’t have to.
Student Loan Payments and Interest
One thing that I have not mentioned that was included in the CARES Act is that the Act suspends student loan payments through September 30, 2020. Both principal and interest payments are suspended with no penalty and no interest will accrue on these loans during the suspension period. So if making those payments is causing you a hardship, you can temporarily stop making them. Again, just don’t forget to start again when the suspension period ends!
That is what I know as of right now. The pace of legislation and the related relief provisions and the implementation guidance has slowed down a bit, especially for most of my clients. Larger firms and CPAs who handle larger small businesses are still getting hit pretty hard. Guidance concerning the Paycheck Protection Program loans (more on that in a future post) for partnerships and self-employed people just came out a day or two ago. I still expect that there will be more relief coming (including addressing the ‘donut hole’ for EIPs for college age dependents) but for now, the tax practitioner community is slowly catching up to the most recent batch of tax law changes and additional guidance.
Hang in there. Stay home. Stay healthy.