In response to financial challenges created by the COVID-19 Pandemic, on March 27, 2020, the House passed, and the President signed into law, the Coronavirus Aid, Relief, and Economic Security, or “CARES” Act. This legislation includes income tax rebates which will be paid almost immediately to Americans with a Social Security number, or for those in the process of adoption, an adoption identification number. The family law attorneys at Van Den Heuvel Law Office realize that parents who are unmarried or those going through a divorce may have questions about how your payments will be affected, and we want to help.
Payments authorized by the CARES Act are meant for all U.S. citizens and residents, except those who are claimed as a dependent on another’s taxes. Trusts or estates are also not eligible. Those who are eligible will receive a maximum payment of $1200 per adult and $500 per child. Adults filing jointly will receive up to $2400. To receive the maximum payment, taxpayers and federal benefits recipients must have an income of no more than $75,000 per person, $112,500 for a head of household, or $150,000 per couple. For every dollar of income over this amount, the payment is reduced by $.05, which means it is eliminated at $24,000 of additional income per adult and $10,000 of additional income per child.
This means a single parent with one child who earns $35,000 per year should receive a payment of $1,700. Several tools are available online to help you calculate your payment amount.
For children, payments will be issued to whoever claimed the child on their 2019 income tax return. If parents have not yet filed for 2019, the payment will be based on the 2018 income tax returns. For those who receive social security retirement or disability income, or railroad retirement income, and those who are eligible for the payment but have not filed a tax return for either of the last two years, you may still receive a payment by filing a tax return for 2018 or 2019 by the end of this year. The government offers free “file online” forms, available here. By filing a return now, those with no income, or less than the amount required to file an income tax return may still be able to receive this payment, and possibly other credits or payments allowed by federal law.
The information available at this time suggests that the payments will only be withheld or garnished in the case of past-due child support. Back taxes, other garnishments, and other processes that normally reduce refunds are not being applied to payments under the CARES Act.
If you filed jointly in 2018 but divorced in 2019 and neither former spouse has filed a 2019 return yet, the payment will be based on the 2018 return and sent electronically to the account listed on that return. In the event that the account is no longer open, a jointly payable check will be mailed to the address listed on the return. However, the recipient is not necessarily entitled to keep the joint payment. Adults are each entitled to their own payment, even if your divorce judgment does not include a clause for this specific situation.
A notice of when and how the payment was made must be sent to the last known address on file within 15 days. If you no longer live at the address listed on the return, and you’re worried that your former spouse may not share the payment, it may be a good idea to submit a temporary change of address with the U. S. Postal Office, to ensure that the notice addressed to you is received at your current address.
While the law is relatively clear on how payments are divided for adults, there is less clarity on whether the recipient parent must share a payment related to a child. Because these funds are intended for the benefit of the child, parents and their attorneys should be proactive in advocating that the funds be divided equitably. For some couples, this will mean dividing it equally, but it could also mean allocating more to the parent who pays a higher percentage of the child’s uninsured medical costs, for example.
The CARES Act is designed to bring financial relief to American families, and no doubt it will help a great many, but the allocation of tax rebate payments, particularly for children, is likely to lead to conflict for some families as well. While some disputes may end up in front of judges, the relatively small amount involved is likely to encourage most couples to act in the best interests of the children.
If you’re going through a divorce or considering one, you probably have a lot of concerns that go far beyond the CARES Act. The lawyers at Van Den Heuvel Law Office have been helping individuals and families deal with tough legal situations for decades, and we want to help. If you have questions about a divorce or child custody matter in Michigan, contact our office to request a consultation today.
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