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Payments for children rules vary

by Natalia Vander Laan

As a result of recent financial hardships, many families are counting on Economic Impact Payments to provide some financial relief. While most have received their individual stimulus payments, many parents have complained that they did not receive the extra $500 for each qualifying child promised by the Coronavirus Aid, Relief, and Economic Security Act.

Like the individual stimulus payment, the extra $500 for each qualifying child is also subject to the income limits. Therefore, for every $100 of income above the thresholds, the check will be reduced by $5. However, there are no limits on the number of children that qualify.

The Act defines a qualifying child as the son, daughter, stepchild, eligible foster child, sibling, stepsibling, half-sibling, or a descendant of any of them. The child must be a U.S. citizen, U.S. national, or resident alien with a valid Social Security Number who is living with the individual eligible for the payment for more than half the tax year. A qualifying child must be under the age of 17 at the end of the taxable year and must be claimed as a dependent on the 2018 or 2019 tax return. Lastly, the child must not provide over half of their own support for the tax year.

If a child is born, adopted, or placed into foster care in 2020, the stimulus check in 2020 will not include an additional amount for these children because the payment in 2020 is based only on information from the 2019 or 2018 tax return. The child, though, may be claimed next year for an additional credit on the 2020 tax return.

The payment will be made to whichever parent claimed the child as a dependent on the 2019 tax return or signed up for the stimulus check and listed the child as a dependent. It will not matter who the child lives with or who is the representative payee or guardian.

If a parent received an additional $500 payment in 2020 but the child just turned 17 in 2020, there is no requirement to repay it when filing the 2020 tax return. However, the same child that was claimed as a dependent on the 2019 tax return and who just turned 17 in 2020, will not receive his or her individual payment in 2020. Similarly, a child claimed as a dependent on the 2020 tax return will not receive his or her individual payment in 2021.

The payment will be made to whichever parent claimed the child as a dependent on the 2019 tax return or signed up for the stimulus check and listed the child as a dependent. It will not matter who the child lives with or who is the representative payee or guardian.

If a child’s parents who are not married to each other both receive the additional $500 for a child, the IRS website states that there is no requirement in the law to repay it. However, each parent should review Notice 1444, the Economic Impact Payment, that the IRS mails shortly after the payment is made, and they should keep the notices for their 2020 tax records and consult with their tax professional to assure compliance with the law.

The stimulus checks are set up in such way as to not impact the child’s benefits such as food stamps, SNAP, Medicaid, TANF, SSI, healthcare marketplace credits and most other government programs.

It is important to follow the IRS rules and regulations in deciding whether to declare a child as a dependent for tax purposes and compensation from the CARES Act. Make sure to consult with your tax professional.

Natalia Vander Laan is a Minden attorney practicing estate planning, family law, and workers’ compensation.