Direct payments to eligible American families under CARES

The CARES Act was signed into law this Friday, providing a range of relief measures in response to current events. The bill provides for a direct payment intended to assist low and middle-income individuals and families.

What is the payment amount?

Individual US taxpayers who earned less than $75,000 on an annual basis will receive a one-time $1,200 cash payment and couples will get up to $2,400. For each child, an additional $500 will be included in the check.

The stimulus payment amount decreases proportionally by $5 for every $100 of income to the extent a taxpayer’s income exceeds $150,000 for joint filers, $112,500 for a head of household filer, and $75,000 for anyone else (including single filers).

Amounts by Filing Status and Income are shown in the graph below, and calculation tables are included at the end of this guide.

How will income be calculated?

The calculation is based on the Adjusted Gross Income on your 2019 tax return. If you haven’t filed your 2019 taxes yet, the government will use your 2018 tax return to calculate the amount. Payments are structured as tax credits automatically advanced to households in 2020 if you filed a 2019 income tax return. They are not considered taxable income.

When will I receive the payment?

How quickly is an unanswered question at the moment. Treasury Secretary Steven Mnuchin has said he wants the payments to go out within three weeks. Senate Minority Leader Chuck Schumer said President Donald Trump hopes the Internal Revenue Service can start sending the money much sooner than that, on April 6. Former IRS agency officials have noted that both of those timeframes are overly optimistic and pointed out that previous stimulus check payments that took about two months to reach taxpayers.

How will I receive the payment?

They will be received as a direct deposit or check by mail. A Senate Republican aide who helped draft the legislation said that for households for which the IRS has direct-deposit information -- which is about half of those eligible for the money -- those payments will go straight into people’s accounts. Checks sent in the mail will take longer to reach people, the aide said. The government is also contemplating using pre-loaded debit cards to send the payments to people who don’t have bank accounts.

Who will receive the payment?

An individual must have a Social Security Number (SSN) to be eligible. Nonresident aliens and individuals who can be claimed as a dependent by another taxpayer are not eligible to receive the rebate. In addition to American taxpayers, the CARES Act will also apply to all resident aliens. You are a resident alien if you meet either the green card test or the substantial presence test.

• The Green Card test: You are a resident alien if you have U.S. permanent or conditional residence (a green card). These citizens of other countries are authorized to live and work in the United States on a permanent basis.
• The Substantial Presence Test: If you do not have a green card, but spend 31 days in the US during the current year and 183 days during the three-year period that includes the current year and the two years immediately before that, you are considered a resident alien. This can include many people who are in the United States on temporary nonimmigrant visa types. However there are exemptions for time spent in transit (less than 24 hours in the U.S.), time during which the person could not leave because he or she required medical treatment, as well as for teachers and students (on F, J, M, or Q visas) who haven’t stayed in the U.S. beyond a certain period of time.

Note that non-US students and teachers are often classified as non-resident aliens in the early years of their stay in the US. Non-resident aliens are not eligible for the tax credit.

What happens if I do not receive my payment?

If a payment doesn’t arrive in your bank account or mail, or you receive less than you are owed, you can try to contact the IRS, or claim the amount on your tax return when you file in 2021. 

Example calculation