Many Americans are receiving stimulus checks as a result of the coronavirus stimulus package. These payments have generated questions regarding entitlement and their impact on property division, support, and child custody in the context of a divorce or separation.
While these are unprecedented times and there are few guarantees as to the full effect of these payments in the area of family law, below are answers to several frequently asked questions regarding the 2020 stimulus checks:
How is the stimulus amount determined?
The starting point for a stimulus check is $1,200 per adult or $2,400 for married couples filing jointly, and an additional $500 per qualifying child (generally, a dependent child under age 17 at the end of the qualifying tax year).
The amount starts to be reduced for those earning more than $75,000 for single filers, $150,000 for joint returns, and $112,500 for heads of household, until a person or household is completely phased out (at $99,000 for single filers, $136,500 for heads of households, and $198,000 for joint filers, subject to a $10,000 increase in each threshold per qualifying child).
Why is the stimulus payment deposited into a joint bank account?
Stimulus checks are disbursed in the same fashion as your 2019 tax refund (or 2018 refund if you have not filed a 2019 return). Therefore, if you and your spouse/ex-spouse filed jointly on your last tax return but have since separated, the check is deposited in the same account or mailed to the same address as your most recent tax refund.
If you no longer have access to this account, you should seek experienced legal advice regarding how to recover any applicable portion you may be owed.
Will I have to repay the stimulus funds I received?
No. There is no provision in the law requiring repayment of the stimulus funds for qualifying taxpayers.
What if I owe money based on my 2020 tax return?
The stimulus payment is not includible in your taxable income on your 2020 federal income tax return, and it will not reduce your refund or increase the amount you owe when you file your 2020 federal income tax return.
For example, if you received $1,200.00 from the stimulus package and your 2020 tax return reflects that you owe the IRS money, you should not have to pay back the stimulus funds received, but you still must pay any income tax owed (had the stimulus payment never occurred).
While it has not yet been addressed formally, we do not anticipate your stimulus check being subject to income taxation in North Carolina.
Is the stimulus payment considered taxable income?
No. See above. You should not be taxed on the stimulus funds you receive.
Do I have to share the stimulus payment with my spouse or ex-spouse?
This depends on various factors including any relevant court orders and the current stage of your divorce or separation.
Please note that if you are behind on your child support payments, your stimulus payment, like any other tax refund, could be garnished to pay child support arrears or other back support owed.
If you are divorced or separated and have received your spouse or former spouse’s stimulus funds, you should seek legal advice immediately on how to handle these funds. The management of these funds may have legal impact and, depending on your circumstances, there could be legal consequences associated with holding another person’s portion of the stimulus payment.
Who is entitled to the stimulus portion allocated for my child?
Because the stimulus check is based on your 2019 tax return (or 2018 tax return if you have not filed a 2019 return), whoever claimed the child on the last filed tax return will receive the funds allocated for that child.
There could be additional issues as to entitlement depending on the terms of any valid and enforceable court order or contract between you and your spouse or former spouse.
If you did not claim the child in 2019, but you will do so in 2020, remember the stimulus check should not affect your refund or tax amount owed for tax year 2020.
If you are in the process of negotiating a separation or divorce, your stimulus check may be relevant when determining issues related to the distribution of property, support (including spousal and child support), and certain child custody matters. You should seek advice from an experienced family law attorney regarding any questions you have about your stimulus check and its effect on your specific case.