Students

If your son or daughter graduated from college in 2019, it’s likely they have a $1,200 payment from the government coming their way as part of the COVID-19 relief legislation. You do not need to have lost your job to receive the money.

And it is possible that the special payment might apply to graduates from 2018 too – but only under certain circumstances.

Do you need to do anything to get the money? Most likely not, but read on for the details. And as always, please consult your tax professional for tax advice.

The IRS says the following (link at the end of the newsletter):

Who is eligible for the economic impact payment?
Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible. Social Security recipients and railroad retirees who are otherwise not required to file a tax return are also eligible and will not be required to file a return.

Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples and up to $500 for each qualifying child.

It’s a fairly simple test for recent graduates who are still single – was your AGI above or below $75,000? Since most graduates don’t make that much in a year, and even those who do only worked for part of the year, that $75,000 limit won’t be a problem for most recent grads.

However, the IRS needs to know you are on your own and earning money. That doesn’t happen automatically. The IRS won’t know unless you have filed a tax return that shows you are not a dependent on anyone else’s return (your parents).

This is important: the IRS says they are going to use the most recent tax return they have for you to determine eligibility for immediate payments. This can present challenges and opportunities.

If your AGI qualified in 2018 but not in 2019, and you have not yet filed your return for 2019, what happens? According to current information, the IRS will use your 2018 return and send you a payment. Since the tax deadline for 2019 taxes has been moved to July 15^th, 2020, there is no problem waiting to file that 2019 return.

There is one more way to qualify to receive the payment, but it’s delayed. My understanding is that the payments are really intended to be “for” 2020 because that is when the problems are occurring.  However for practical reasons, the IRS has to use something to determine qualification status so they are using the above 2018/2019 test.

However, if you do not qualify for the payment based on either your 2018 or 2019 return, but will when 2020’s return is filed, you can still get the payment. It just won’t be until next year after you file your 2020 return. That doesn’t help now, but it is important to keep in mind for next year.

(Note for current high school and college students: if you are able to be claimed as a dependent on your parents’ return, you will not qualify for your own payment, even if you have a job and make money.)

The key takeaway for recent graduates: there is a very high likelihood you will qualify for a stimulus check based on your adjusted gross income for 2018 or 2019 or even 2020.

How do you actually receive the money? The IRS says it will use your bank account information, if it is on file, and make a direct deposit. However, if they do not have that information, this is the current info:

The IRS does not have my direct deposit information. What can I do?
In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.

Official website:  https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know

Finally – what should you do with the money? If you possibly can, save it! Open a separate savings account at your bank with it. You can do this online in just a few minutes. Get the money out of your checking account if you can, so you don’t spend it until you need it.

Update: April 27, 2020

The IRS has updated their website to include specific steps for non-tax filers. Please visit the IRS website for the most current information.

https://www.irs.gov/coronavirus/get-my-payment-frequently-asked-questions