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How Your Social Security Benefits and Your Tax Filing Status May Affect Your Economic Impact Payment

My son’s favorite subjects are math and science. His is preferred mode of learning is activity. His least-preferred mode of learning is reading, synthesizing, and answering questions, based on what he’s read. Today’s subject of struggle was a series of short articles and related questions on South America, it’s countries, climates, and cultures. His real-life, real-time school, when it is in session, is a Montessori school, which means that I am supposed to let him work things out for himself until he cannot. As a harried work-from-home professional, thrown without warning into the parallel role of homeschool teacher, I was getting frustrated by his attempt to circumvent the time-honored Montessori method by alternatively wheedling “Is this right, is this right?” or moaning “It’s not in here ANYWHERE!” about the answer to EVERY question. “This is a skill you have to learn,” I explained, trying to be reasonable. “Any job you have is going to require you to be able to read material and find the answers to your questions. Particularly any job that is going to allow you to afford a Lamborghini,” since this is one of his stated future goals.

Photo by Leon Overweel on Unsplash

Reading frequently and furiously is a requirement, certainly, for anyone, who prepares taxes or works in finance and investment or assists people with disabilities with their benefits. These are all crucial and, sometimes, time-sensitive aspects of life second only, in this crisis, to one’s health and health care. Both the Internal Revenue Service (IRS) and the Social Security Administration (SSA) are updating the public frequently, so it is a good practice (whether for yourself or as a professional for others) to keep checking those agency’s respective websites. Here are some of the basics.

  • There are a profusion of telephone and Internet scams popping up around taxes, Social Security, and the stimulus payments (to be discussed in detail below). The IRS and Social Security WILL NOT COLD-CALL YOU. In fact, given their reduced schedule, they are unlikely to call you at all, unless you are already engaged in a pressing matter. You do not need to provide personal information to ANYONE in order to get a stimulus payment. Social Security checks, including SSI, will flow as normal.

  • You have up until July 15th to both file and pay your taxes (if you owe). If you expect to get a refund, you might want to file sooner rather than later to get your money back. Some tax preparation offices are open although they may have reduced hours and/or new systems to provide for social distancing. Most have ways to file your return virtually, but with the assistance of an actual human being. Most online software also has help features, where you can chat or even talk and screen-share with an actual human being, but be prepared to pay extra for these services.

With regard to the economic stimulus payments:

  • If you are a single person with an adjusted gross income (AGI) less than $75,000, or a married couple with an AGI less than $150,000, then you qualify for a stimulus (or economic impact) payment under the Coronavirus Aid, Relief and Economic Security (CARES) Act. A family will also receive a dependent benefit of $500 for each child under 17. Single filers will receive $1,200, and married filers $2,400. This payment will be reduced by $5 for every $100 of income over the respective levels, and will phase out entirely at $99,000 for single filers and $198,000 for married filers.

  • There is no provision to provide either the “adult” benefit or the dependent benefit for students over 17 or adult children with disabilities, who are claimed as a dependent on another tax return. Nor is there a provision to provide dependent benefits to parents claimed as dependents by their adult children.

  • Divorced people will only receive a dependent payment for a child actually claimed on their 2019 return, unless they have not yet filed and then it will default to 2018.

  • People with disabilities, seniors, veterans and anyone who has non-employment income, including Social Security Retirement income, or Disability Insurance (SSDI), or Supplemental Security Income (SSI) are also eligible for an economic impact payment.

  • Economic impact payments will flow to those, who have filed taxes based on the information on their returns. If you have not yet filed your 2019 taxes due to the deadline extension, the payments will be based on your 2018 return. This means if you were above the eligibility limit in 2018, but below it in 2019, you might want to hurry up and file.

  • If your taxable income is so low that you do not need to file a tax return, the economic impact payment will be based on the information on your form SSA-1099 (for Social Security) or RRB-1099 for Railroad Retirement Benefits.

  • However, if you do not typically file, but you are raising a grandchild, then you might want to file both to get the refundable portion of the regular child tax credit for dependents under 17 AND to get the additional $500 of economic impact money.

  • If you do not receive one of these benefits, but something different such as a veteran’s benefit, you will need to file a tax return as of this writing. This may change.

  • If you receive SSI, and therefore do not get an SSA-1099 because your SSI is not taxable, it is not yet clear how the government will get your information. The Social Security Administration is working with the Department of the Treasury to devise a system.

  • Economic Impact payments will NOT be considered unearned income for SSI and Medicaid recipients. The payment will also NOT be considered a resource for 12 months. However, other contributions that push a recipient’s cash-equivalent assets over $2,000 (single) or $3,000 married may impact that person’s eligibility for SSI or Medicaid.

  • The IRS has plans to set up a secure method for people to provide their direct deposit information. Otherwise, checks will be mailed to the address on record.

With regard to other Social Security matters:

  • The SSA is extending deadlines wherever possible.

  • The SSA has suspended all disability reviews for the duration of the pandemic.

  • The SSA has suspended the collection of most overpayments.

  • The SSA will not be requesting accounting reports from individual or organizational representative payees.

Finding out all the details about the CARES Act, and economic impact payments, as well as all the changes at Social Security and the IRS due to COVID-19 is like trying to find Angel Falls (the world’s highest uninterrupted waterfall, located in Venezuela). Both are doable, but you will need to check and compare multiple resources.

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