With unemployment at its all-time high at nearly 17 million currently unemployed, many Americans are wondering what options they may have. On March 27, 2020, the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) was signed into law by President Trump to provide economic relief. Here is what you need to know.
Economic Impact Payment
Qualified parties would receive direct payments of $1,200 for an individual and $2,400 for a married couple filing jointly. An additional $500 is provided for each child less than 17 years old.
Eligibility for the economic impact payment is based on AGI (adjusted gross income). Record of income will be gathered from 2019 or 2018 tax returns. If you haven’t filed for either of these years, there is still time to do so to secure a payment. You need to make less than $75,000 in individual AGI and $150,000 for married filing jointly. You also cannot be claimed as a dependent or be in college.
If AGI exceeds $75,000, stimulus payment will phase out, up to a maximum AGI of $99,000. For each $1,000 a person makes above $75,000, the payment will be reduced by $50.
Social security beneficiaries will receive a payment unless they are claimed as a dependent.
It is currently anticipated that the IRS will begin distribution through direct deposit as early as April 13, with paper checks issued in the week of May 4.
The CARES Act also enhances the current Unemployment program. Here are some key points to keep in mind:
- Nevada’s state unemployment caps at $469, but under the new policy, claimants will receive an additional $600 per week.
- The program allows for an extension of 13 weeks of coverage and therefore, max period is up to 39 weeks through the end of 2020.
- Those furloughed will also qualify, but those working from home or receiving paid leave will not qualify.
- Those traditionally not covered by unemployment, such as independent contractors and self-employed individuals, may now qualify.
- The federal government is offering an incentive to states to waive the first week waiting period.
Taxes on Stimulus Payment and Unemployment
The stimulus payment is a special type of advance tax credit. The credit will be applied to the 2020 tax season. For those that made over $99,000 in 2019 but lose income through 2020, the credit applies to AGI and can result in an increased return for 2020. Essentially, the payment maxes at $1,200 for an individual but gives people two chances to qualify for the whole amount. If a payment was reduced by $50 for 2018 but lost wages result in an AGI beneath $75,000 the remainder would be paid as part of a 2020 refund. The credit will not cost you in either tax year. It is not a loan of any sort. Since the payment is processed through the IRS, there are implications for those that owe taxes. Typical tax garnishment from back taxes and student loans are waived. The only type of tax debt that can reduce the payment is unpaid child support.
All unemployment compensation, including the supplemental $600, is taxable, but will be excluded from income for Medicaid or Children’s Health Insurance Program (CHIP).
Please consult a tax expert for additional details.
Still Need Help?
At JK Nelson Law, we realize that things are quite chaotic and that everyone is facing financial difficulties. If you feel that the need to explore additional options in how to handle your debt, including bankruptcy, please feel free to reach out. We offer free initial consultations.