Third Stimulus Check Issues and Family Law Matters

Congress recently enacted the “American Rescue Plan Act of 2021” which has recently provided and will continue to provide thousands of dollars in stimulus funds to many families. The bill provides different amounts to different people who fall into different adjusted gross income brackets, and also varies by filing status.

Third Stimulus Check — What You Need to Know

Single Filers

Married Joint Filers

Head of Household Filers

Dependents

What Tax Year is Used for Determining the Third Round of Stimulus Checks?

The stimulus funds are determined based upon the 2019 tax returns filed by each party unless they have already filed a 2020 tax return. So, if someone earned less money in 2019, wherein they were eligible for stimulus funds, and now they aren’t, they may want to wait to file until May 17, 2021, in hopes of receiving their stimulus check in the meantime. As it stands right now, the money received from stimulus checks will not have to be repaid, and even if someone earned more money in 2020 (where they wouldn’t qualify for a stimulus check based upon their 2020 tax filings but would when based off of their 2019 tax filings) they can still qualify for a stimulus check payment based upon their 2019 tax filings. This only can happen so long as the 2020 taxes were not yet filed.

Additionally, the exact opposite is true and may be more applicable to many clients. If someone had a banner earnings year in 2019, but in 2020, their income plummeted, they may be eligible for a stimulus payment in the third round of stimulus payments, where they would not have been for the first two rounds of stimulus payments. For those clients, they want to file as soon as possible, to try and obtain a third stimulus payment, since the stimulus check could be based off of their 2020 tax returns instead of 2019 tax returns, as long as the timing aligns.

Who Receives the Dependency Stimulus Check?

To take this a step further, many parties argue over who should receive the dependent stimulus funds, regardless of who claimed the minor children on their taxes in any given year. Some parties go so far as to file motions regarding this issue. Most parents who have the majority of parenting time believe that they should be the ones who receive the stimulus funds for the dependents, no matter who claimed the minor children on their taxes in any given tax year. Some Judges have been inclined to award whatever the amount is that is allocated to the dependent, or a portion thereof, to the majority time parent, while some Judges have left it in the hands of the filer. In many scenarios, it is not cost-effective for a party to file to ask for the child(ren)’s portion of the stimulus check.

The 2021 Child Tax Credit

In 2019, the Child Tax Credit was $2000 per qualifying child dependent. This has been increased to up to $3,600 per qualifying child, but there is a phase out based upon income, just like stimulus checks. Because it is anticipated that half of the Child Tax Credit will be paid during calendar year 2021 to the person who claimed the minor child(ren) on their 2020 tax returns (but technically as a 2021 tax year benefit), and the remaining half will be paid to the person who claims the minor children on their 2021 tax returns, we as practitioners can anticipate many arguments about who should receive the July through December of 2021 payments (which are technically an “advance” on the 2021 tax filing refund). For parties who switch off years claiming their children, this will likely become an issue. (For more information, See Section 9611 and 9612 of H.R. 1319, “American Rescue Plan Act of 2021”.)

THIS ARTICLE WAS PREVIOUSLY PUBLISHED AT: https://illinoislawforyou.com/family-law/third-stimulus-check-issues-and-family-law-matters/

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