• Devendra Sharma, CPA

IRS Recovery Rebates (Stimulus Checks)

IRS has announced to pay non-taxable recovery rebate payments to American Taxpayers. Please see below common FAQs on this subject.



1. Who are eligible?

a) Must be US Residents for Tax Purpose

Generally all individuals other than non-resident taxpayers are eligible for this benefit. It includes US Citizens, Permanent Residents, Resident Alien Taxpayers and Children under 17 years of age who are claimed as dependents.


H1/L1/other non-immigrant visa holders who filed Form 1040 for year 2018 or 2019 are eligible. If they filed Form 1040-NR, they are not eligible for this benefit.


b) Must have valid US Social Security Number

Another requirement of the CARES Act is that the eligible individuals should have valid SSN (eligible for employment).

2. How About People Recently Moved Out of US?

a) You may be eligible if you pass substantial presence test

It is possible that people who moved out of US in 2020 pass substantial presence test and may be eligible to file as US residents. In such case, they may be eligible for this payment.

b) Resident election for non-resident spouse

If taxpayer is a US resident and spouse is non-resident, non-resident spouse can make an election to file as US resident and joint return with US resident taxpayer. In such case, both may be eligible for this payment provided non-resident spouse also has valid SSN.


c) Daily commuters from Canada to US

People who commute for work daily from Canada to US and file US tax return as resident may be eligible for this payment.


3. Are International Students eligible?

Most international students on OPT/CPT are considered non-residents for tax purposes and file Form 1040-NR. As per the CARES Act, non-residents are not eligible for this benefit.


4. How is the benefit amount calculated?

Benefits will be based on your Adjusted Gross Income (AGI i.e. line 7 of 2018 tax return or line 8b of 2019 tax return) from latest year filed federal tax return (year 2018 or 2019).


a) Individual Tax Payers:

- If your AGI is $75,000 or less, you will get $1200 for self and $500 for each child under age 17.

- Amount will gradually reduce with AGI exceeding $75,000 and no benefit will be paid if AGI is $99,000 or more. For every $100 increase in AGI beyond $75,000, the benefit will reduce by $5.


Example – a single taxpayer with one child with AGI of $72,000 will get $1700.


b) Married Tax Payers

- If your AGI is $150,000 or less, you will get $1200 each for self and spouse and $500 per child.

- Amount will gradually reduce with AGI exceeding $150,000 and no benefit will be paid if AGI is $198,000 or more. For every $100 increase in AGI beyond $150,000, the benefit will reduce by $5.


Example – a married taxpayer with one child with AGI of $145,000 will get $29,00.


c) Head of Household Filers

- If your AGI is $112,500 or less, you will get $1200 each for self and $500 per child.

- Amount will gradually reduce with AGI exceeding $112,500 and no benefit will be paid if AGI is $148,500 or more. For every $100 increase in AGI beyond $112,500, the benefit will reduce by $5.

Example – a married taxpayer with one child with AGI of $145,000 will get $29,00.

Benefit for child are not subject to phase-out limitations. That means taxpayers with income more than above limits will still get benefit for child.


5. Do I have to submit an application?

No, taxpayers who have filed either 2018 or 2019 tax return with refund directly deposited into their bank account will receive this benefit automatically, no separate application / action needed from your end.


One check status of their payment at IRS portal (only for stimulus payments) at https://www.irs.gov/coronavirus/economic-impact-payments

6. Direct Transfer or Paper Check?

If you used your bank account for direct deposit of refund on 2018 or 2019 tax return, you will get money as direct deposit in the same account. If you haven’t used bank account for direct deposit, IRS has developed online portal where you can update your bank details for direct deposit of this benefit. This portal can be accessed at https://www.irs.gov/coronavirus/economic-impact-payments. At this portal, you can also check status of this payment and update your bank details.

7. I filed returns but had balance due and not refund?

If you filed 2018 or 2019 tax return but did not have a refund or did not use a bank account for direct deposit of refund, you will need to update your bank details in the IRS portal above.


8. Is it a loan? Do I have to pay it back?

No, it is not a loan and you do not have to pay it back to the government.


9. Is it taxable?

No, this benefit is non-taxable. You do not have to report it in your tax return.


10. Frequency of Payments

One time.


11. Americans living abroad.

American taxpayers living abroad will automatically receive this benefit if they filed 2018 or 2019 tax return.


12. When will I receive the payment?

IRS expects to start sending money by third week of April 2020.


13. What if I did not file 2018 and 2019 tax return?

In such case, you may not be able to receive the benefit. You should file your tax returns (at least 2018) asap. If you did not file return because your income below the filing threshold, IRS is planning to introduce ‘Simple Tax Return’ just to get the benefit. We will be happy to share more details once available.


14. Common Issues

  1. I haven't received this benefit yet: IRS is transferring this amount in phased manner. So all eligible individuals should receive it.

  2. I am unable to access IRS portal to update my bank details: You should continue to try to access the next business day as IRS portal is being updated constantly. In the portal, you can track status of this payment and update your bank details.

  3. Please note that if for some reason if you are unable to receive this payment now, it will be available till December 2020. You be able to claim it till the time your file your 2020 tax returns.

  4. Please go through more resources available at below links

https://www.irs.gov/coronavirus/economic-impact-payment-information-center

https://www.irs.gov/coronavirus/coronavirus-tax-relief-and-economic-impact- payments-for-individuals-and-families


15. Be aware of Scams.!

Do not respond to phone calls or emails asking for information or payments to process your stimulus check. The CARES Act specifies that the IRS will send letters to taxpayers within 15 days of payments being issued. The letter outline three things:

  • How the IRS issued payment

  • How much the IRS paid

  • How to contact the IRS if payment wasn’t received


Source - www.aicpa.org, www.irs.gov

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