The CARES Act is distributing $500 stimulus payments for each qualifying child during the coronavirus pandemic. For those that are divorced, which parent gets it? Family Law Attorney Elizabeth Early explains.
Disclaimer: The regulations and guidance relating to the CARES Act payments continue to develop and are far from complete. The guidance in this blog is provided in connection with the feedback we are receiving today from our accountants. This information is subject to modification as more information and guidance is released by the Internal Revenue Service.
Millions of Americans who earn under certain income thresholds have received or will receive payments under the Coronavirus Aid, Relief and Economic Security (CARES) Act. Qualifying payment recipients will also receive additional funds ($500) for each qualifying child. The Internal Revenue Service has a ton of information addressing the income threshold and the definition of a qualifying child on their website. Below, I will explain which parent will get the payment and how it impacts child support.
Which parent receives the stimulus payment related to the child/children in a separated or divorced family?
Assuming that the parties file tax returns on a timely basis, the payment relating to the child will be issued to the parent who claimed the child or children on his/her 2019 federal tax return. The other parent (the parent who did not claim the child/children on his/her 2019 tax return) will not receive a payment this year for the child/children even if the other parent is the primary custodial parent.
Which parents receives the payment if 2019 tax returns weren’t filed?
In the event that the parties did not file 2019 tax returns, who receives the payment relating to the child will likely be based on the 2018 filing. Many parents are now faced with seeking a fair resolution to the division of the payment.
Can 2020 tax returns be used to decide who receives the payment?
It is possible that the non-recipient parent will receive compensation via a preferential tax treatment in connection with their 2020 federal tax return or via another payment, if the parties agree to change who claims the child/children on the 2020 federal tax return. The law is still developing in this area and we recommend consulting with an accountant to evaluate your options.
How do the CARES Act payments impact child support?
The CARES Act payments are non-taxable income that can be attributed to the receiving party for support purposes. Know that, even if the “wrong” parent receives the payment, that you may recoup a small portion in support. Parties may also agree to divide the payment outside of the support calculation.
Are the CARES Act payments subject to interception for overdue child support?
At this time, the guidance handed down to attorneys and the Domestic Relations Section of the Court is that the payment IS subject to interception for overdue child support. Complications may arise in this area where intercepted CARES Act payments were issued by the government in connection with children who are not covered under the support order at issue.