Millions of Americans have received stimulus payments authorized by the federal government via the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Because the legislation was enacted in late March, these payments have come right in the middle of what should be tax season. The federal government extended tax filing and payment deadlines to July 15, but millions still filed around the same time that the checks and direct deposits were going out.
The CARES Act stimulus payments, officially defined as tax rebates, have been sent to individuals with an annual income of $75,000 or less and to married couples filing jointly who made less than $150,000 combined. Additional funds were distributed to parents of children 17 years old and under. To determine whether people were qualified, the federal government used information from their last tax returns on file. These would be the 2019 submissions for those who had already filed this year and the 2018 returns for everyone else. This hastily developed system may create some potential complications for people whose family situation has changed since the last time they filed.
If you filed jointly last year, but are now separated or divorced
If your last tax return was a joint filing with your spouse but you no longer live together, it’s important to monitor how the CARES Act stimulus payment was distributed. For example, if you shared a bank account that you used to collect a tax refund or to pay the IRS last year, your stimulus money should have been deposited there. You are entitled to half of that payment, but you may no longer be a signatory to that account. Alternatively, a check could have been sent to your previous address. If you believe you qualify but haven’t received a payment, don’t hesitate in asking where your funds might have been sent. To find out more information go to the IRS’s page for economic impact payments.
If you and your spouse are dividing property as part of a divorce
When spouses divorce, the property they accumulated during the marriage is divided between them. This would include rebates received from the government under the CARES Act. It’s possible that you and your spouse filed separate tax returns and accordingly received separate checks or direct deposits. Since all income paid to one spouse or the other is considered marital property, these funds would be divisible upon divorce.
Even if your breakup is relatively amicable, it is critical to pay close attention to the stimulus payment and other marital assets that might be overlooked during discussions of property division. Once your marriage is ended and the order is entered, you likely won’t get a second chance regardless of the circumstances that existed at the time of the divorce.
If your filing status is no longer what you listed on your last tax filing, review your records to determine where and how the funds will be distributed. It’s also important to be on the same page with your ex-spouse if you aren’t in control of the account where the money will be deposited.
If you’re unable to agree, you may need to seek legal counsel to make sure the funds are shared fairly.