U.S. citizens and U.S. resident aliens will receive the Economic Impact Payment of $1,200 or $2,400 if they filed married filing jointly and if they are not a dependent of another taxpayer and have a work-eligible Social Security number with adjusted gross income up to:

-$150,000 for married couples filing joint returns

-$112,500 for head of household filers and

-$75,000 for all other eligible individuals

Taxpayers will receive a 5% reduction in their payment for the amount their AGI is above these amounts. This information has been taken from the Internal Revenue Service, the income tax wing of the U.S. Government.

The relevant web site is : https://www.irs.gov/newsroom/economic-impact-payment-information-center-eip-eligibility-and-general-information

Since the above scheme has a relationship to the largest number of taxpayers in the U.S.A. or other non-taxpayers with certain conditions, it is time to know the full details. The narratives may take a conversation style at someplace. All information from various places in the above web site for easy understanding.

Who else would get the payment?

  • Eligible retirees and recipients of Social Security retirement, survivor, or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI), and VA Compensation and Pension (C&P), who do not file a tax return, will receive a $1,200 payment automatically. (Interestingly, many of my clients do fall under this category and an automatic receipt will boost them.)
  • More good news for who paid the taxes – For eligible taxpayers who filed tax returns for 2019 or 2018, they receive the payments automatically. For people who have little or no income and didn’t file a tax return or don’t receive any of the federal benefits listed above, they are also eligible for an Economic Impact Payment. They need to register with the non-filer tool on IRS.gov as soon as possible to receive the payment.

Let us note down the list of non-eligible taxpayers for this payment. Quite a long list, though.

Taxpayers who won’t qualify for an Economic Impact Payment (EIP) if any of the following apply. “You”, in the following quote would mean a taxpayer:

  • “You do not have any qualifying children and your adjusted gross income is greater than
    • $198,000 if your filing status was married filing jointly
    • $136,500 for the head of household
    • $99,000 for all other eligible individuals
  • You can be claimed as a dependent on someone else’s return. For example, this would include a child, student who can be claimed on a parent’s return, or a dependent parent who is claimed on their child’s return.
  • You do not have a Social Security number that is valid for employment.
  • You are a nonresident alien.
  • You filed Form 1040-NR or Form 1040NR-EZ, Form 1040-PR or Form 1040-SS for 2019.
  • An incarcerated individual.
  • A deceased individual.
  • An estate or trust.”

Various other information may arise to help a genuine tax payer who faces the most horrifying pandemic of the century, most uninvited, however.

Who still needs to take action to get the above payment?

Additional child payment of $500:

Some federal benefit recipients need to act by September 30. The IRS reopened the registration period only for individuals who are federal benefit recipients who didn’t receive $500 per qualifying child payments earlier this year.

Those who received Social Security, SSI, RRB, or VA benefits can use the IRS.gov non-fliers’ tool through September 30 to provide information about a qualifying child to receive a $500 per child payment.

Will the taxpayer receive an intimation about payment from I.R.S?

Many of my tax clients informed me that they received the letter from I.R.S. and also that as indicated in that letter which was sent 15 days before sending the check. This is on account of security reasons. However, any taxpayer can verify the genuineness of the letter after visiting the I.R.S. web site. Details about the scamsters have been given in detail in the said web site.

The following message is amply clear about scamsters, though it is nothing new and everyone finds the same message but many foolishly do lose money.

“The IRS doesn’t initiate contact with taxpayers by email, text messages, or social media channels to request personal or financial information – even related to the economic impact payments. Also, watch out for emails with attachments or links claiming to have special information about economic impact payments or refunds.”

Any reader in India knows for certain that every day someone or others encourage us to part with our bank details so that tax refund would reach immediately. I do find even educated people falling prey to such catchy slogans.

I.R.S. never uses email, text messages, or social media to request personal information from tax clients in spite of pandemic. Being a unique organization with billions of transactions in its existence, it knows how to avoid fraud.

What about U.S. taxpayers living in India and the economic impact payment?

Thousands of the above categories of U.S. taxpayers live in India and would get the payments.

Let me add more important information.

Anyone eligible to file Form 1040 or Form 1040-SR is an eligible person if they have a valid SSN and can’t be claimed as a dependent of another taxpayer. Nonresident aliens who file or would file Form 1040-NR or Form 1040-NR-EZ are not eligible for the Payment. This is important information for concerned taxpayers. 

If a taxpayer two checks, one from I.R.S. and another from a U.S. tax territory agency or in some cases two payments, they should inform the U.S. tax agency or I.R.S and return the payments. I could hear the murmur that contacting any of the tax agencies has been a delaying matter in the absence of non- availability of tax associates or their time. I have witnessed some times a couple of hours for holding by these agencies on the phone though no one can be blamed due to the uncertain economic situation everywhere.

Did not file a return for 2018, 2019, then:

If a taxpayer has a filing requirement but has not filed a tax return for 2018 or 2019, he must file a 2019 tax return to receive the payment.

We understand from the IRS web site that it is experiencing delays processing some returns. If a taxpayer had already filed, he needs to take no action and should NOT file a duplicate return. If he had not yet filed the return but is required to do so, the returns should be filed electronically and opt for electronic payments which entail electronic impact payment of $1200 or $2400 directly into the account referred to I.R.S.

My experience with the recent handling of U.S. clients indicates that there is considerable delay in the handling of work at I.R.S due to a reduction in the budget at their end and less availability of Associates, as they call their human resource personnel who handle this work.

Does some taxpayer who died recently eligible to receive the payment being discussed?

If the payment was received after his death, the payment should be returned by his heir but it was in a joint tax account in the name of husband and wife and the living spouse is eligible to get U. S. $ 1200.00. Out of US $ 1200 needs to be returned to IRS stating the facts.

Does a resident alien eligible to receive EIP?

A person who is a nonresident alien in 2020 is not eligible for the Payment. A person who is a qualifying resident alien with a valid SSN is eligible for the Payment only if he or she is a qualifying resident alien in 2020 and could not be claimed as a dependent of another taxpayer for 2020. Aliens who received a Payment but are not qualifying resident aliens for 2020 should return the Payment to the IRS.

Interestingly, some of my taxpayers who filed their tax return before April 15, 2020, as per usual practice have received some additional payments from I.R.S. How can one explain this situation?

It is essential to look copious instructions issued by IRS particularly after the recent pandemic, which is called a federal disaster.

“Many individual taxpayers whose 2019 tax returns show refunds will receive interest from the IRS. The regular April 15 due date for filing returns and paying income taxes was postponed to July 15, 2020, as part of the IRS response to the COVID-19 pandemic. The IRS is required by law to pay interest on tax refunds due to individual taxpayers affected by the federally declared disaster who filed their federal tax returns for 2019 on or before the postponed due date of July 15, 2020. The over payment interest will generally accrue from the original April 15 due date, rather than the postponed due date of July 15.

Normally, the IRS is required to pay interest on a refund if the refund is issued after a statutory 45-day period. This rule does not apply to individual taxpayers who qualify for relief due to a federally declared disaster.”

If I am a taxpayer who scrupulously file my tax returns and did not receive the interest payments as they call these checks, can I approach I.R.S. for this additional payment?

With the American tax authorities, the laid down rules govern the procedure, and whatever due as interest payments would be paid invariably and one can, however, can contact by telephone.

Important information to note.

Most taxpayers who received their tax refunds by direct deposit will have their interest payments direct deposited in the same accounts. Everyone else will receive a paper check. A notation on the check (INT Amount) will identify it as an interest payment on a tax refund. Most interest payments will be issued separately from tax refunds.

Some explanations:

It is a common practice that whenever we electronically file any tax payer’s return, his/her banking details are input in the tax return so that refund amounts or any additional amount to be paid as tax arrears with other deductions like interest or other charges will be directly credited or debited as the case may be. In this case, the additional interest payments would be credited to the bank account mentioned in the tax return.

Let us also talk about some business accounts and the current economic impact.

I.R.S, web site gives the information that new employee retention credit has been introduced which would help employers to keep employees on payroll up to the following limit.

For purposes of this credit, employers experiencing an economic hardship include those with suspended operations due to a government order related to COVID-19 or that have experienced a significant decline in gross receipts.

The tax credit is 50% of up to $10,000 in qualified wages paid to an employee. The employer’s maximum credit for qualified wages paid to any employee is $5,000. Qualified wages include the cost of employer-provided health care.

Let us analyze with an example given below:

Example. The eligible employer pays Employee B $8,000 in qualified wages in Q2 2020 and $8,000 in qualified wages in Q3 2020. The credit available to the employer for the qualified wages paid to Employee B is equal to $4,000 in Q2 and $1,000 in Q3 due to the overall limit of 50% of up to $10,000 of qualified wages per employee for all calendar quarters.

Let me be frank with you that your C.P.A. would easily calculate the exact amount and apply for the credit and submit the tax return for your information before submission to I.R.S.

Form no. 941 known as employer’s quarterly federal tax return will be used.

Conclusion

Since the introduction of economic impact payment which works out to be $1200 for an individual and $2400 for joint tax return holders, a large number of inquiries started coming from my tax clients. I have been under the impression that as a routine every eligible tax return filer for 2018 or 2019 would get it credited in their bank accounts. But for those who did not return, it became an issue and with COVID 19 and its after-effects the service available at I.R.S. got limited and no one was available for giving any information. As I have explained above, one has to give adequate time to get the money in due course.

As I emphasize often, it is advisable to use the services of a good C.P.A.  who will maintain your records, file tax returns, and handle all situations including COVID 19 successfully allowing you to earn your income peacefully.

*****

Disclaimer: The views collected by me from various positions from IRS Websites and given in the article are purely personal and one does not give tax or legal advice in an article. Obviously, neither taxguru.in nor Internal Revenue Service, the Federal department of American Government is responsible for my views. Please use the services of an active Certified Public Accountant to get proper tax advice.

Author Bio

Qualification: Post Graduate
Company: subramanian natarajan cpa firm
Location: NEW DELHI, New Delhi, IN
Member Since: 09 May 2017 | Total Posts: 127
A banker with 27 years of experience, a CPA from USA with specialization in US taxation, individual, partnership, S corporation or LLC taxation etc View Full Profile

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