Congress passed a law, HR 748, known as the Coronavirus Aid, Relief, and Economic Security Act or the CARES Act, on March 27, 2020. The CARES Act, among other things, grants an automatic tax rebate to most people. Section 2201 of HR 748 details payments to individuals.
What Are the Stimulus Payments?
The CARES Act refers to these payments as tax rebates. The Treasury Department calls them Economic Impact Payments, as does the IRS. I call them stimulus payments, as do many media sources.
They are essentially an automatic tax rebate which is paid irrespective of whether a person actually paid taxes. There are three stated disqualified classes: nonresident aliens, dependents, and trusts/estates. This leaves a broad range of people that potentially will receive the payments in the near future.
Who Will Get a Payment? Who May Not?
Social Security recipients will automatically receive the stimulus payments. For others, the IRS advises people who receive disability benefits but do not ordinarily file taxes to file a special return.
However, for those individuals whose only source of income in both 2018 and 2019 were time loss or workers’ compensation pension benefits – which are non-taxable benefits – the CARES Act does not clearly state whether those individuals are eligible to receive the tax rebate payment.
Should I File a Tax Return?
We believe there is no downside or risk for individuals who receive only workers’ compensation benefits to file a special tax return. If you have questions about how to characterize or claim your benefits on a special tax return, we suggest you contact a tax professional.
How Much Can I Expect to Receive?
The amount is subject to adjustment upward or downward depending on filing status, income, and number of dependents. For most people, the calculation of, and eligibility for, these payments will be based on their 2019 or 2018 tax returns.
Where Can I Get More Information?
The IRS has provided some guidance on it’s coronavirus website, with the clear instruction to not call the IRS but to check back frequently for updates. I will be paying attention to IRS rulemaking in the next several weeks. You should also periodically check in on the IRS website for further information.
I have reached out to house members and senators for Washington State for clarification. I am closely monitoring the rule making process. We will do our best to keep you informed on any changes.