Congressional Research Service IN11268 (COVID-19 and Direct Payments to Individuals: Summary of the 2020 Recovery Rebates in the CARES Act, as Circulated March 22)
Summary
CRS Insight IN11268, COVID-19 and Direct Payments to Individuals: Summary of the 2020 Recovery Rebates in the CARES Act, as Circulated March 22, by Margot L. Crandall-Hollick, Acting Section Research Manager, dated March 23, 2020. It summarizes the recovery rebates in the CARES Act text circulated on Sunday, March 22, 2020, which differ from the legislation introduced on March 19. The proposed rebates equal $1,200 per person ($2,400 for married joint filers) and $500 per child, phasing down for higher-income taxpayers. They would be advanced automatically in 2020 based on a 2019 return, or 2018 return information, and seniors who did not file would receive them based on their 2019 Social Security benefit statement. Nonresident aliens, dependents, and estates or trusts are excluded.
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INSIGHTi
COVID-19 and Direct Payments to
Individuals: Summary of the 2020 Recovery
Rebates in the CARES Act, as Circulated
March 22
Margot L. Crandall-Hollick
Acting Section Research Manager
March 23, 2020
Legislative text of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, circulated on
Sunday, March 22, 2020, proposes direct payments to individuals and families—“2020 recovery rebates.”
This Insight provides a brief overview of the proposed 2020 recovery rebates included in the text
circulated on March 22, which differ from those included in the legislation introduced on March 19.
The proposed 2020 recovery rebates equal $1,200 per person ($2,400 for married taxpayers filing a joint
tax return) and $500 per child. These amounts would phase down for higher-income taxpayers. These
payments are structured as tax credits automatically advanced to households in 2020 if they filed a 2019
income tax return and would be received as a direct deposit or check by mail. If a 2019 return had not
been filed, rebates would be advanced automatically based on 2018 return information. Seniors who did
not file an income tax return would have the credit automatically advanced in 2020 based on their 2019
Social Security benefit statement.
Credit Amount
The proposed credit equals $1,200 per person ($2,400 for married joint filers) for eligible individuals.
Generally, an eligible individual is any individual excluding (1) nonresident aliens, (2) individuals who
can be claimed as a dependent by another taxpayer, and (3) an estate or trust.
Individuals eligible for the credit would receive an additional $500 for each child that qualifies for the
child tax credit.
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The total proposed credit phases out at a rate of 5% of adjusted gross income (AGI) above $75,000
($112,500 for head of household filers and $150,000 for married joint returns). An illustration of the
amount of the rebate by income level is provided in the figure below.
As with any tax refund, these payments would not count as income or resources for a 12-month period in
determining eligibility for, or the amount of assistance provided by, any federally funded public benefit
program.
The proposed credit would be a fixed amount until income reaches the phaseout level. Lower-income
taxpayers with little or no income tax liability would be eligible for a tax credit equal in dollar value to
that received by middle-income and upper-middle-income taxpayers. Hence, as a percentage of income,
this rebate would be largest for the lowest-income recipients. The tax credit would phase out at the upper
end of the distribution as shown in the figure above.
Other Features of the Proposed 2020 Recovery Rebates
SSN Requirement: Taxpayers would be required to provide a Social Security number
(SSN) for themselves, their spouse (if married filing jointly), and any child for whom
they claim the $500 child credit. Adoption taxpayer ID numbers (ATINs) are also
acceptable for adopted children. Taxpayers who provide an individual taxpayer
identification number (ITIN) would be ineligible for the credit. Hence, married couples in
which one spouse has an SSN and another has an ITIN would generally be ineligible for
the credit.
The bill would relax these ID requirements for married joint filers in which at least
one spouse is a member of the Armed Forces. In those cases, only one spouse must
provide an SSN.
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Public Awareness Campaign: The bill would instruct the Treasury Secretary in
coordination with the Commissioner of Social Security and the heads of other relevant
federal agencies to provide information to individuals who may not have filed a 2019 or
2018 income tax return.
Notice to Taxpayers: The bill would require that individuals identified as eligible to
receive a payment be sent a notice that provides them with information on the amount of
the payment, how it will be delivered (direct deposit/paper check), and a phone number at
the Internal Revenue Service (IRS) to call if the payment is not received.
Nonresident Aliens: The credit would not be available to nonresident aliens.
Territories: The bill includes a provision requiring the U.S. Treasury to make payments
to individuals in the territories (mirror code and non-mirror code) equal to the aggregate
amount of credits claimed by their residents.
Past-Due Debts: The credit cannot be reduced for certain unpaid debts, including debts
owed to a federal agency (excluding child support), past-due state income taxes, federal
taxes, or unemployment compensation debts.
Appropriations: The bill would appropriate $617.35 million in FY2020 for the
administration of these payments.
Advancing the Proposed 2020 Recovery Rebates
The bill would automatically advance the credit, which would be received as a direct deposit or a check
by mail. Without this advancing provision, taxpayers would have to wait until they filed their 2020
income tax returns in early 2021 to claim this credit.
The advanced credit amount would be estimated by the Internal Revenue Service (IRS) using the same
formula as the 2020 recovery rebates, but based on taxpayers’ 2019 income tax return information (if the
taxpayer did not file a 2019 income tax return, 2018 income tax return information could be used instead).
For Social Security recipients, if neither a 2019 nor a 2018 income tax were filed, then information from
their 2019 Social Security Benefit Statement (SSA-1099) could be used instead. If, when taxpayers file
their 2020 income tax returns in 2021, they find that the advanced credit is greater than the actual credit,
then they would not be required to repay the excess credit. In contrast, if the advanced credit is less than
the actual credit, then taxpayers would be able to claim the difference on their 2020 income tax returns.
Nonfilers
Taxpayers with gross income less than the standard deduction amount are not required to file a federal
income tax return. In general, public cash assistance for low-income populations, such as Supplemental
Security Income, is not considered gross income under a limited general welfare exclusion. Hence, many
low-income individuals and families whose income is largely from public assistance may not have filed a
2018 or 2019 income tax return and as such, would not receive these rebates in 2020. A 2017 study found
that “nonfilers” were more likely to be either seniors or recipients of public assistance compared to those
who filed a tax return.
IN11268 · VERSION 2 · NEW
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