Section 9601 of the Act adds Code Sec. 6428B to provide a refundable tax credit in the amount of $1,400 per eligible individual.
Eligible Individuals: An eligible individual is any individual (Realtors, Brokers, and Real Estate Professionals) other than (1) a nonresident alien, (2) a dependent of another taxpayer, and (3) an estate or trust. The credit is $1,400 per taxpayer ($2,800 in the case of a joint return) and $1,400 per dependent of the taxpayer for the tax year. For purposes of the recovery rebate, the term “dependent” has the same meaning given the term by Code Sec. 152 and thus can include a qualifying relative. The credit begins phasing out starting at $75,000 of adjusted gross income (AGI) for an individual ($112,500 for heads of household and $150,000 in the case of a joint return or surviving spouse) and is completely phased out where an individual’s AGI is $80,000 ($120,000 for heads of household and $160,000 in the case of a joint return or surviving spouse).
Advanced Payment Based on 2019 or 2020 Tax Returns: The provision also provides for the Department of Treasury to issue advance payments based on the information on 2019 tax returns or 2020 tax returns if the taxpayer has filed a tax return for 2020. If an advance payment is issued to a taxpayer based on the 2019 return, and the taxpayer files his or her 2020 tax return before the earlier of (1) 90 days after the 2020 calendar year filing deadline, or (2) September 1, 2021, the taxpayer will receive an additional payment equal to the excess (if any) of the amount to which the individual is entitled based on the 2020 return over the amount of the payment made based on the 2019 return. The “2020 calendar year filing deadline” means the date specified in Code Sec. 6072(a) with respect to returns for calendar year 2020 (i.e., April 15, 2021), determined after taking into account any period disregarded under Code Sec. 7508A if such disregard applies to substantially all returns for calendar year 2020. Solely for purposes of advance payments, a tax return is not treated as filed until the return has been processed by the IRS.
Valid Identification Numbers Generally Required: A taxpayer is not eligible for the recovery rebate unless the taxpayer includes a valid identification number on the tax return for the tax year. A valid identification number means a social security number (SSN) or, in the case of a dependent who is adopted or placed for adoption, the dependent’s adoption taxpayer identification number. For married taxpayers filing jointly, where the social security number of only one spouse is included on the tax return for the tax year, the payment amount is reduced to $1,400, in addition to $1,400 per dependent with a valid identification number. However, a special rule applies to members of the armed forces. For married taxpayers filing jointly, the payment amount is $2,800 if at least one spouse was a member of the armed forces at any time during the tax year and at least one spouse includes his or her SSN on the joint return for the tax year. Any individual who was deceased before January 1, 2021, is treated as if his or her SSN was not included on the return for the tax year. In the case of a joint return where only one spouse is deceased before January 1, 2021, where the deceased spouse was a member of the armed forces, and the deceased spouse’s SSN is included on the tax return for the tax year, the SSN of one (and only one) spouse is treated as included on the return for the tax year for purposes of determining the rebate amount. No payment will be made with respect to any dependent of the taxpayer if the taxpayer (both spouses in the case of a joint return) was deceased before January 1, 2021.
Returns Not Filed for Either 2019 or 2020: Individuals who do not file returns for either 2019 or 2020 (i.e., nonfilers) will receive advance payments on the basis of information available to the Treasury Department, and the payment amount may be determined with respect to such individual without regard to the AGI phaseouts. Payments may be made to a nonfiler’s representative payee or fiduciary for a federal benefit program and the entire amount of the payment will be used only for the benefit of the nonfiler. Payments to nonfilers may not be made by reloading any previously issued prepaid debit cards.
No Administrative Offset: Advance payments are generally not subject to administrative offset for past due federal or state debts. In addition, the payments are protected from bank garnishment or levy by private creditors or debt collectors. Additionally, the provision instructs the Treasury Department to make payments to the United States territories that relate to each territory’s cost of providing the credits.
Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.
DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260
Toll Free: (877)CPA-Help or (877)272-4357
P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.
(Updated 03/13/2021 08:05)