IRS stimulus payments

March 30th, 2020

This email was added to our website as a blog post on 4/1/2020.

This is the first of three long emails.  These three emails will go out this week.  These emails are being sent out due to the emergency legislation, and you must understand the new rules are not even written yet.  Patience is going to be necessary with us, with the banks, and with all of the government agencies involved.  There is no chance this money will get into people’s hands as soon as The Trump Administration is claiming.  It is impossible, and that is what every expert is saying.

Please read this email entirely before contacting us with questions about stimulus payments.  If you have questions about unemployment and emergency loans, please hold all of those questions until we understand the rules.

The long emails that will come out from us are:

This is the first one, and it will discuss the stimulus checks.  The IRS will be mailing stimulus checks to many taxpayers.  Roughly 75% of our clients will receive stimulus checks.

The second one covers unemployment, and we will try to get this email out by Wednesday of this week.  Congress is ordering the states to expand unemployment benefits massively, and these benefits will flow to many people who were not previously eligible, and the amounts paid will, in many cases, exceed the amount of money workers are paid via their usual jobs.

The third one covers emergency loans, and we will try to get this email out Friday of this week.  Large amounts of loans will be available to small businesses; in some cases, these loans will be forgiven and be considered a free grant.

Before we get to each of these items, we want to remind you of several issues:

Our office hours are 2 PM – 6 PM Monday – Friday only.  Only one set of clients is allowed in the office at a time, and if you are sick or have had a fever in the last three days, please do not come into the office for the safety of our employees.

We are open and want you to drop off income tax returns and other work in our 24-hour dropbox; mail them to us, email them to us, or send them to us via our secure portals.

Five of us are primarily working from home.  A lot is going on, and we ask for your patience; we will not be able to get back to you as quickly as we usually do.  We nowhave to field hundreds of questions about this new legislation, and we will be assisting many people with emergency loan packages.  1st quarter payroll taxes are due at the end of April, and tangible business personal property tax returns are due May 15th.    The best way to contact us is to email the person you usually deal with.  The second-best way to reach us is to call us in the office and leave that person a voice mail.  We will get back to you within 3 or 4 business days; however, it will take longer than usual.

These laws are new, and Congress, The Small Business Administration, The Department of Labor, Banks, The Internal Revenue Service, The Indiana Department of Workforce Development, SBS CPA Group, and many other agencies and organizations are still trying to understand the 2,000 pages of legislation and please remember the Government is issuing clarifications and procedures every day.  Everyone has to be patient with not only us but all of the aforementioned agencies.  This is unprecedented legislation and will take longer for the Government to enact and implement than they are claiming it will.

The Government is promising payments, unemployment benefits, and loans; all of these items will take longer to get into the hands of taxpayers than they are saying.

The IRS is mailing stimulus checks to many Americans

First off, the Federal government is claiming they will send checks or directly deposit these payments, and their goal is to have this done around April 17th, 2020.  Based on past experience, this seems very unlikely, and we expect the stimulus payments will be sent in late April or more likely early May 2020.  They will likely be transmitted over a 2-3 week period based on last name.

The IRS will use your 2019 income tax returns if they are filed already, and they will use your 2018 income tax returns otherwise.   If you are on Social Security and not required to file a Federal income tax return, you will receive a stimulus payment and need not file a 2018 or 2019 income tax return.

This is a refundable tax credit that will be reconciled on your 2020 income tax returns filed in 2021.  If the IRS overpays you, there will be no adverse consequences; you will not have to pay it back.  If the IRS underpays you, the additional amount you are owed will be handled on your 2020 income tax returns filed in 2021.

If the IRS has direct deposit information on file for you, they will use it; otherwise, they will mail you a check.  If you have changed bank accounts, your direct deposit will not go through, and the IRS will send you a check.

The tax credit phases out based on income:  Roughly speaking, 6% of Americans will not get any stimulus payment because their income is too high.   Another 6% will get a reduced stimulus payment.

The rebates are based on Federal adjusted gross income.  This is line 7 of your 2018 1040 or line 8b of your 2019 1040 or 2019 1040-SR.  This is your adjusted gross income before most deductions.

How much you will receive is as listed below:

Filing Status                            AGI Amount               Stimulus Check Amount

Single                                      $75,000 or less            $1,200

Married filing jointly              $150,000 or less          $2,400

Head of Household                 $112,500 or less          $1,200

Dependents Under 17             N/A                             $500, paid to your legal guardian

The additional $500 per child is not well defined by the IRS yet, and questions regarding this will need to wait until the IRS establishes rules in the next 7-10 days.  If you claim your children as dependents on your income tax return, they do not qualify for their own stimulus payment because they are your dependent.  Further, the way the law is written, the children have to be sixteen years old or younger for their parents to receive an extra $500 payment.  It is currently unclear how this will be handled if the IRS uses a 2018 return or even a 2019 return.  If your child is 16 or under at the end of 2020, it is certain they will qualify for the additional $500 stimulus payment.   It is also unclear how the IRS will handle this for children whose parents are divorced.  It currently looks like parents will not phase-out of the additional $500 for their children who qualify for the $500 payment.

There are phase-outs for higher-income taxpayers.  If you are single and your AGI is $99,000 or higher, you completely phase out of your stimulus payment and get nothing.  If you are Head of Household and your AGI is $135,000 or higher you completely phase out of your stimulus payment and get nothing.   If you are married and file a joint return and your AGI is $198,000 or more you completely phase out and get nothing.

If you are Married Filing Separately the law currently does not address this situation and the IRS will issue further guidance down the road.

Just like the stimulus payments in 2008, this is going to be a mess for the IRS to deal with.  What the IRS is currently saying is:

They will let the public know when the payments are to be sent.  As mentioned earlier we feel the payments will come out in late April or early May; however, the Trump Administration is claiming the payments will go out sooner.

They are not accepting any questions from the public or tax practitioners regarding the payments.  They are telling the public to be patient.

The IRS is saying in May or June they will send out letters discussing the stimulus payments to each taxpayer and after you get that letter you can contact the IRS to get more information and they will tell you how to do so.

The IRS has made it clear that they are going to focus on getting as many of the stimulus payments sent as they can and then deal with questions and problems later.  Unfortunately, if you do not get your stimulus payment when you expect to you will have to be patient and wait until you get a letter from the IRS and wait until they issue further guidance.

There are already scams trying to convince tax payers to make various payments in order to get their stimulus checks.  These are scams.

This email was long in an effort to ensure you understand what your stimulus payment will be.

Two more emails will follow later this week.

SBS CPA Group

Mike Sylvester, CPA

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