On March 27, 2020, President Trump signed into law an economic relief act that will result in the government issuing cash payments to millions of Americans. The payments are meant to provide support for Americans who are responsible for their own financial well being or that of another during the pandemic.
Most Americans, who qualify based on income, will receive $1,200 per adult and $500 per child under the age of 17. Those who are 17 but still eligible to be claimed as a dependent on a parent’s tax return, will not receive a stimulus payment. The payments will be based on each person’s most recently filed tax return. Considering the extensions of 2019 tax filing deadlines, for some families this could mean 2018 tax returns and for others 2019 tax returns. The payments will automatically be deposited into the bank account associated with the tax return, if automatic deposit was used in the past.
Recently Divorced Couples:
For couples who were married at the time they filed their last tax return but have since divorced, this may create a situation where the stimulus money is being deposited into an account which is now owned solely by one party or the other. Securing your portion of the stimulus may require the assistance of counsel.
Also, there is the question of who should retain the stimulus payment for the child or children if the last return was joint. Should the payment be split or should the custodial parent retain this payment? This is a new and emerging issue that the BKR Family Law Team will be watching in the coming weeks.
If you have been divorced long enough that your last returns were not filed jointly, you will receive your own portion of the stimulus directly. The legislation seems to indicate that the children’s portion of the stimulus will be paid to the parent who claimed the child as a dependent on the last tax return. Whether or not that is the most equitable outcome is another issue. Again, we will be monitoring our local courts for opinions on this topic. One additional unanswered question is what will happen if the parent claiming in even numbered years has only filed their 2018 return while the parent claiming in odd numbered years has already filed a 2019 return?
Couples Whose Divorces are Filed but not Final:
Typically, courts treat tax refunds as a marital asset to be divided equitably between the parties, if the refunds were earned prior to the date of filing of the petition for dissolution of marriage. Who should retain the stimulus payments or whether the funds should be equitably divided will be a fact sensitive question for courts and family law practitioners. Considering the purpose of these payments, the outcome will likely rest on who was shouldering the responsibility for supporting the family during the pandemic.