Watch the video on YouTube to see timestamped chapters and important points (you can skip around for the info you really want) and subscribe to our channel. Thanks for watching!

THE CALCULATOR (AS PROMISED)

https://grow.acorns.com/coronavirus-stimulus-checks-calculator/

POINTS TO REMEMBER:

Here is a breakdown of points to remember from the new “coronavirus relief” bill/law, AKA the “Coronavirus Aid, Relief, and Economic Security (CARES)” Act. Disclaimers first, this is not legal advice or tax advice, nor does it form any sort of an attorney-client relationship. In short, this is a bullet-point overview, as an educational reference, nothing more. Ask a tax professional for the specifics of your situation, as always.

Okay, with that said, the refund amounts are as follows:

  1. $1,200 per eligible individual and $2,400 per married couple, subject to reductions;
  2. An “eligible individual” means any individual other than non-resident aliens, estates or trusts, or any individual with respect to whom a deduction under section 151 (personal exemption) is allowable to another taxpayer for the year (meaning you were already claimed as the dependent of another – dependents are not eligible to receive this rebate);
  3. $500 times the number of “qualifying children” (this gets confusing but, hold on, it is explained below);
  4. You will get the full amount if you make less than:
    1. $150,000 if married, filing jointly;
    2. $112,500 if filing as head-of-household;
    3. $75,000 and not in either of the above-two categories;
  5. If you make more than these amounts, your TOTAL PAYMENT will be reduced (including the child payment portion, which has been misreported elsewhere) by 5% of the amount over the thresholds listed above. In other words, pick your filing category (Married, HOH, Other), subtract the corresponding threshold amount, and multiply by 5% of the difference. Then take that number and subtract it from your payout.

Here is the formula:
PAYOUT (PO) = $1,200 or $2,400, + $500 x QUALIFYING CHILDREN (see below).
INCOME (individual or married) – THRESHOLD AMOUNT (for your category, 150k/112.5k/75k) = EXCESS EARNINGS (EE). EE * 5% = REDUCTION AMOUNT (R). PO – R = PAYMENT to expect.

 

  1. The definition of “qualifying child,” in typical IRS/IRC (“Internal Revenue Code”) fashion, is very convoluted and self-referential. In short, it means:
    1. Any individual under 17 who is the child of the taxpayer, a descendant of such child (grandchildren qualify), or a brother/sister/stepbrother/stepsister of the taxpayer or a descendant of any such relative (nieces/nephews). That person must also have the “same principal place of abode as the taxpayer for more than one-half” of the year (live with you), not have provided over half of the individual’s own support (the qualifying child cannot be independent, paying over half of their own expenses) and cannot have filed a joint return with the individual’s spouse (they, themselves, didn’t file as married).
    2. Note that disabled adults DO NOT meet the criteria for “qualifying children,” even if they “cannot engage in any substantial gainful activity because of a physical or mental condition and it is medically determined that the condition has lasted or can be expected to last at least a year or lead to death.” The limitation of “under 17” disqualifies them, as with the Child Tax Credit.See the IRS guidance on QCs here: https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/qualifying-child-rules

TRANSCRIPT OF THE VIDEO ABOVE:

“Hi, I’m Dave Roemerman.

I’m a bankruptcy and foreclosure defense attorney in New York City and the founder of Roemerman Law.

In this video, I am going to spell out some of the provisions in the new coronavirus stimulus bill, particularly as they pertain to the rebate portion of the bill.

I’ve thought for years that the best attorneys really only offer two things: peace of mind and translation. Peace of mind means “my lawyer’s on it,” and translation means to and from legalese and laymen’s terms. This video will translate a complex statute into a few simple, understandable points.

Now, I haven’t seen my office in lower Manhattan in a few weeks – I’m here at home in Queens with my wife and our two cats. I’ve posted some information recently on Facebook about coronavirus and the new bill and I’ve gotten good feedback. With that in mind, I thought I’d shoot a video to help translate the complexities of the new “coronavirus stimulus bill.” Everyone is asking “how much will I get?” Unfortunately, I have seen some incorrect info out there, so I thought I’d be helpful and clarify the rebate portion.

So, a few nights ago, I sat down and read that part of the bill, it’s section 2201, along with the several Internal Revenue Code (“IRC”) provisions that 2201 references. I will give you the details here in the video, but everything is also included below, in the text, including a calculator to help you figure out the amount you should expect to receive. Of course, don’t consider this legal or financial advice, just a guide to give you some idea what to expect.

HOW DOES IT WORK? THE BASICS…

Anyway, the bill provides that every “eligible individual” will receive $1,200, with married couples getting $2,400, jointly. An “eligible individual” is, basically, anyone who is NOT a non-resident alien, a trust or an estate, or a dependent already claimed on someone else’s taxes. There are also some limits for people in higher income brackets, which I’ll get to in a minute.

Additionally, you get $500 for every “qualifying child.”

Many of you are familiar with the concept of a “qualifying child.” This may be a bit different than what you are used to, especially compared to claiming “qualifying children” as dependents, so I’ll lay out the details of that here in a minute, as well.

Before we get to the income limits and who is a qualifying child, let’s look at the basic math. In short, take $1,200 for yourself, or $2,400 as a couple if you filed as “married,” ($1,200 each) and add $500 for every child that qualifies – you can see more on that in the text below.

If you want a nice calculator, check out the link below. Full disclosure, my wife is the one who coded that for her employer, CNBC. Appreciation of her aside, it really is a great calculator and it’s gotten well over a half-million views in just a of couple days, so check it out.

WHAT ARE THE INCOME LIMITS THAT REDUCE THE REBATE?

As for the income limits, they are $150,000 for married couples, $112,500 for people who filed as head of household, and $75,000 for everyone else, mainly meaning single people.

If you made above those limits, your rebate is reduced. The way to determine that is to take what you made and subtract those threshold limits – the numbers I just mentioned – then reduce the rebate by 5% of the difference. In plain English, that means you figure out how much you were over, find 5% of it, then reduce your payout by that amount.

As an example, a single person makes $85,000. She makes $10,000 over her $75,000 threshold. Thus, she would be reducing her payout by 5% of that $10,000. For those of you who don’t love math, 5% of $10,000 is 500 bucks. Thus, her $1,200 rebate is reduced by $500, meaning she should expect a $700 payment. That’s pretty straightforward, as is the concept of $500 for each child. However, knowing who is a “qualifying child” is trickier, and it’s one big reason I made this video.

WHO IS CONSIDERED A “QUALIFYING CHILD?”

Now, let me go through the definition of “qualifying child.”

The rules here are like the ones used in determining your Child Tax Credit for those of you who happen to be familiar with that. The test consists of six factors:

  1. The Age Test

First, anyone under 17 qualifies as meeting the age requirements, regardless of other age-related tests found in the IRC. I’ll come back to those soon.

  1. The Relationship Test

Second, a qualifying child must have a certain relationship to the person claiming them as a dependent child. The child can be your son, daughter, stepchild, adopted child, foster child, or a descendant of any of those people, meaning your grandchildren.

Also, anyone who is your brother, sister, half-brother-or-sister, step-brother-or-sister, or descendant of them, meaning a niece or nephew, counts, too.

  1. Residence Test

The person must have lived with you for more than half the tax year for which you are claiming a credit. Exceptions include a child who is born/died during the year or a child who is absent from home for school, vacation, business, medical care, etc. This is general pretty easy but, if there are questions, consult a tax professional to determine whether someone should qualify.

  1. Dependent Test
    1. The person must be your child, sibling, niece or nephew, or grandchild;
    2. Now, normally, this provision, who is a dependent, means anyone under 19 or under 24 who is a full time student at least 5 months of the year, or someone who is permanently disabled; note that this is the normal test but that it does not control here – the under 17 provisions leads and the test here is whether the person is your dependent, not whether they meet the usual age requirements.
    3. Additionally, they cannot have filed as married along with another filer.
  2. Support Test

The person must not have provided over half of his or her own financial support during the tax year.

  1. Citizenship Test

The person being claimed must be a U.S. Citizen, a U.S. National (American Samoan or from the Northern Mariana Islands), or a U.S. resident alien. This is like the “eligible person” requirements – no non-resident aliens qualify for the refund, nor do non-resident aliens qualify as children eligible for the rebate credit..

The information in this video is also available on this page, below, because it was a lot of info in a video and I know most of you weren’t taking notes. 😊 At Roemerman Law, we pride ourselves on providing “Real Solutions for Real People,” so hopefully this page helps a lot of you know how much you have coming and lets you plan for the future a little in these hard times.

As a final thought, to all the people out there on the front lines, the doctors, nurses, first responders, police and firefighters, delivery people, and others keeping us up and running, I just want to thank you and say bless you. To everyone on team human, stay safe and stay healthy. Salud!”

END OF TRANSCRIPT

MORE IN-DEPTH STATUTORY ANALYSIS (FOR THOSE WHO CARE)

The “new bill,” the law we are looking at is H.R. 748: Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

Specifically, we need to review:

Section 2201. 2020 recovery rebates for individuals

This section 2201 adds a new section to the Internal Revenue Code (“IRC”), “Sec. 6428. 2020 RECOVERY REBATES FOR INDIVIDUALS.

Sub-section (a)(1) of section 6428 spells out the $1,200/$2,400 to each “eligible individual” piece. (a)(2) deals with “qualifying children” x $500, deeming a qualifying child to be defined under section 24(c) of the IRC.

Section 24(c) says that a “qualifying child means a qualifying child of the taxpayer (as defined in section 152(c)) who has not attained the age of 17. Confused yet? All this does is limits the upper age to under 17. The actual definition of “who” meets the requirements can be found in section 152(c).

Section 152(c) says that a “qualifying child” generally means a person:

  • With the relationship described in paragraph (2) (paragraph (2) says: a child of the taxpayer, a descendant of such child (grandkids count), or a brother/sister/stepbrother/stepsister of the taxpayer or a descendant of any such relative);
  • Who lives with the taxpayer >50% of the year;
  • Who meets the age requirements of paragraph (3) (and here, paragraph (3)(A)(i) says under 19 or (3)(A)(ii) says student under 24). These ages do not matter, as the controlling provision, section 24(c) says under 17. One other notable thing here is that paragraph (3)(B) provides an age exemption for permanently and totally disabled individuals (IRC section 22(e)(3) if you’re currently loving this exercise in statutory analysis 😉)). However, that provision is overridden by the requirements of the child being “under 17,” just as with the Child Tax Credit – it’s arbitrary, yes, but that’s the cutoff – no adults qualify, disabled or otherwise;
  • Who pays less than 50% of their own support for the year (they are not independent);
  • Who has not filed a joint return with their own spouse.

H.R. 748, Section 2020 (a) gives the rebate amounts, (b) says what provision allows it, (c) gives the limit on income for each filing category, respectively, and (d) sets forth the definition of an eligible individual.

OF NOTE: § 2020 (c) very clearly says “The amount of the credit allowed by subsection (a)…shall be reduced (but not below zero)…” This means that the reduction applies to both items in 2020(a), the individual rebate (2020(a)(i)) and the child rebate (2020(a)(ii)). There is no separate, independent math for qualifying children.

For additional information on other parts of the bill, I recommend looking at GovTrack, a stats-based, neutral federal legislation-tracking site. https://www.govtrack.us/congress/bills/116/hr748

Okay, we hope that helps!

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