Co-parenting and divorce are difficult issues for families to navigate, and they haven’t become any easier during the current economic times and COVID-19 pandemic. On March 27th, 2020, Congress passed, and the President signed into law, the Coronavirus Aid, Relief and Economic Security (CARES) Act. It is an immense law (247 pages in length) that provides financial help for parents and families by authorizing “stimulus” payments from the IRS. For co-parents and divorcing spouses, a number of questions can arise regarding the implementation of stimulus checks. Here are answers to five of those frequently asked questions:
- Do I qualify for a stimulus check?
All adult American citizens and residents with legal status, who are not claimed as tax dependents, are potentially eligible to receive stimulus checks so long as their incomes do not exceed certain thresholds. For individual or married filing separately tax filers, the maximum benefit income threshold is $75,000, under which a $1,200 check will be issued; $112,500 for head of household filers, under which a $1,200 check will still be issued; and $150,000 for married filing jointly filers, under which a $2,400 check will be issued. Income is defined as the adjusted gross income reported on a filer’s 2019/2018 federal tax returns, with 2019 having priority. A smaller stimulus check may be issued if a filer’s income exceeds these threshold amounts. For more information, here is a link to a stimulus check estimator provided by H&R Block: https://www.hrblock.com/coronavirus-tax-impact/calculator/.
2. My spouse and I are in the process of getting a divorce. Who will receive the stimulus check?
- If you and your spouse filed a joint 2019 federal tax return, then the IRS will automatically issue any eligible stimulus check to the refund deposit location provided on your 2019 return.
- If both you and your spouse filed separate marital returns for 2019, then the IRS will automatically issue separate stimulus checks.
- If you and your spouse have both yet to file your 2019 federal tax return(s), then the IRS will issue payment based on your 2018 return(s).
- If you and your spouse filed a joint return for 2018 and only one of you has filed a separate return for 2019, then it is unclear how the IRS will disperse stimulus checks in this situation.
3. Are stimulus checks marital property to be divided equitably between me and my soon-to-be ex-spouse?
There is no single answer to this question. Technically, all stimulus checks are advanced tax credits for the 2020 tax year (and to dispel a common misnomer, the stimulus checks will not otherwise reduce a person’s tax refund for 2020). But to complicate things further, the stimulus amount is based on either 2019 or 2018 federal tax filings. Thus, when the stimulus benefit was “accrued” is arguable, which matters to decide whether it is marital property. Under Nebraska law, a divorce court has discretion in defining when marital property stops accruing between spouses. And this date may not be the same for valuing all assets in a marriage, including tax benefits. Accordingly, if a divorce court decides that marital property stopped accruing prior to December 31, 2020, then there is a chance that all or some of the advanced stimulus credit may not be classified as marital property, and therefore not divided equitably.
4. Between co-parents, who is entitled to our child’s stimulus check?
Again, there is no single answer to this question. Most parents of children 16 years old or younger for the 2020 tax year are eligible to receive an additional $500 stimulus credit, so long as they can claim the qualifying child on their 2020 federal tax return. A court order, such as a divorce decree, paternity decree, or temporary order, may expressly rule which co-parent is entitled to the tax benefits for a qualifying child in 2020. However, the IRS will likely advance the $500 stimulus credit to whichever parent claimed the child on his or her 2019 federal tax return (or 2018 federal tax return if neither parent has filed and claimed the child for 2019), regardless of whether this parent is ordered to receive the tax benefits for the child in 2020. If no court order has determined which parent should receive the child’s stimulus credit, then IRS rules state that the parent who has “[physical] custody for the greater portion of” 2020 should receive the stimulus credit. But in light of the uniqueness of this stimulus benefit, co-parents may, and perhaps should, agree to divide their child’s stimulus benefit equally.
5. I am afraid my spouse or co-parent will not cooperate in providing me with my portion of stimulus benefits. Is there a way to change where the IRS sends or deposits the stimulus checks?
Maybe. The IRS has promised a website portal where stimulus recipients can go to change where their stimulus benefits will be deposited. As of April 6, 2020, this portal has not yet been brought online, and the IRS has yet to state whether both spouses or co-parents must authorize changes in direct deposit information. Moreover, spouses and co-parents alike should be wary of potentially violating the terms of any court orders that may prohibit this type of action.
It should also be noted that a Nebraska court cannot directly order the IRS to pay these benefits to a specific spouse or co-parent. Instead, a Nebraska court has the authority to direct one spouse or a co-parent to pay these benefits to the other spouse or co-parent. This difference can be significant, as some spouses or co-parents delay or contemptuously refuse to follow court orders, causing delays to the other spouse or co-parent in receiving the benefit.
For more answers to questions on stimulus checks and the CARES Act, here is a nice resource published by the New York Times: https://www.nytimes.com/article/coronavirus-stimulus-package-questions-answers.html.
Between co-parents and spouses, the implementation of stimulus benefits and the CARES Act is a complex legal issue. Our legal team at Koenig|Dunne has represented thousands of divorcing spouses and co-parents through tax issues and rapidly changing laws. Contact us today for more information.