Double Dipping On The IRS? Why Divorced Parents May Unintentionally Receive Two Stimulus Payments
As if the Cares Act stimulus payments that came about this past spring as a result of the Coronavirus pandemic weren’t confusing enough, we’ve got another curveball for you. This one has to do with parents who are divorced, separated, or never married and for those reasons alternate years claiming their children on tax returns. If this situation applies to you, you’ll definitely want to read about the latest update below.
First, some background. Under the Cares Act, parents are entitled to receive a one-time $500 payment per dependent child under the age of 17. Unfortunately, many parents (maybe even some of you) have yet to receive that payment for one or even all of your children. In some cases, a child may not qualify for this payment. But if your child meets all the requirements, and you still haven’t gotten your share of the relief package, you’ll be able to get what you’re owed when you file your 2020 tax return.
So part of your stimulus payment is a little delayed, no big deal right? Well, claiming this as part of your 2020 tax return creates an issue for those parents who do not file a joint return. In situations like these, the IRS seems to be sending two checks for the same child.
How could they be so foolish, you ask? We don’t have enough time to get into that right now. So for the purposes of this article, all you need to know is that in order to determine eligibility for stimulus payments, the IRS is looking at the 2018 AND 2019 tax years. Stimulus relief is actually considered an advance credit for tax year 2020.
The IRS has released guidance to clear this up stating that “Parents who are not married to each other and do not file a joint return cannot both claim their qualifying child as a dependent.”
Additionally, they clarified that the taxpayer “generally must be related to the child, live with them more than half the year and provide at least half of their support to qualify for the $500 benefit.” In short - only one parent can claim the child and receive the payment.
So what can you do to ensure you’re receiving the payment you deserve without putting yourself in danger of an audit? In a recent guidance document, the IRS said: “When the parent who did not receive an additional payment files their 2020 tax return next year, they may be able to claim up to an additional $500 per-child amount on that return if they qualify to claim the child as their qualifying child for 2020.” So the big takeaway here is that knowing if 2020 is your year to claim your child is key.
If you have any questions regarding stimulus payments don’t hesitate to reach out to us. We’re here to help you get what you’re entitled to. And here’s your friendly reminder to begin prepping for 2020 tax season as it’s sure to be another doozy.
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