Stimulus checks

[livinmybestlife]

Good Morning,

I am writing to find out if anyone knows if there will be some kind of credit on my taxes this year since my ex-husband has gotten all the stimulus money for our child, and will likely receive the next one as well since he was able to claim her last year. I am frustrated by how this has all worked out because I am the only one that has incurred increased costs due to the virus, but he is getting thousands of extra dollars this year due to claiming all of his kids. To me, it seems like the money should go to the person that has the child more than 50% of the year, (more like 75 in our case), and who has to sign form 8332, but that isn't the case. I just am hoping to see some benefit come tax time, but haven't found anything regarding that when I search online. Has anyone else heard of anything about this topic?

 

[Zigner]

Good Morning,

I am writing to find out if anyone knows if there will be some kind of credit on my taxes this year since my ex-husband has gotten all the stimulus money for our child, and will likely receive the next one as well since he was able to claim her last year. I am frustrated by how this has all worked out because I am the only one that has incurred increased costs due to the virus, but he is getting thousands of extra dollars this year due to claiming all of his kids. To me, it seems like the money should go to the person that has the child more than 50% of the year, (more like 75 in our case), and who has to sign form 8332, but that isn't the case. I just am hoping to see some benefit come tax time, but haven't found anything regarding that when I search online. Has anyone else heard of anything about this topic?

No, there won't be and there shouldn't be. You will need to work this out with your ex, and if that's not successful, then you'd have to convince a court to order him to pay you a portion of what he received.

 

[livinmybestlife]

Thank you for your time. I sincerely appreciate it.

 

[Zigner]

How many kids does he have that are also your kids?

 

[LdiJ]

Good Morning,

I am writing to find out if anyone knows if there will be some kind of credit on my taxes this year since my ex-husband has gotten all the stimulus money for our child, and will likely receive the next one as well since he was able to claim her last year. I am frustrated by how this has all worked out because I am the only one that has incurred increased costs due to the virus, but he is getting thousands of extra dollars this year due to claiming all of his kids. To me, it seems like the money should go to the person that has the child more than 50% of the year, (more like 75 in our case), and who has to sign form 8332, but that isn't the case. I just am hoping to see some benefit come tax time, but haven't found anything regarding that when I search online. Has anyone else heard of anything about this topic?

If you didn't receive a stimulus for your child you should be able to get one on your 2020 tax return.

 

[LdiJ]

No, there won't be and there shouldn't be. You will need to work this out with your ex, and if that's not successful, then you'd have to convince a court to order him to pay you a portion of what he received.

Zig, that isn't accurate. The stimulus money is an advance tax credit for 2020. If someone doesn't get the stimulus in advance, they will get to take the credit on their 2020 return.

 

[adjusterjack]

To me, it seems like the money should go to the person that has the child more than 50% of the year, (more like 75 in our case),

If you want that you'll either have to get his agreement or go to court for a court order.

 

[Zigner]

Zig, that isn't accurate. The stimulus money is an advance tax credit for 2020. If someone doesn't get the stimulus in advance, they will get to take the credit on their 2020 return.

Read it again. Dad got the stimulus money for the kids.

 

[LdiJ]

Read it again. Dad got the stimulus money for the kids.

Correct, but mom will still have the opportunity to get that on her return. The question that is to be pondered, which has been pondered once before on this forum, is whether or not dad will have to pay the stimulus payment for the kids back, since they will not be his dependents for 2020. Of course, if the kids are not mom's dependents for 2020, but still dad's, then mom still wouldn't get the stimulus for them for 2020 either.

 

[Taxing Matters]

Correct, but mom will still have the opportunity to get that on her return. The question that is to be pondered, which has been pondered once before on this forum, is whether or not dad will have to pay the stimulus payment for the kids back, since they will not be his dependents for 2020. Of course, if the kids are not mom's dependents for 2020, but still dad's, then mom still wouldn't get the stimulus for them for 2020 either.

Correct. However, at the moment in this situation at least it appears the IRS position is that Dad wouldn't have to repay the wrongfully issued stimulus check. In a recently updated (August 3) FAQ on the stimulus (Economic Impact) payments, the IRS says the following:

Q65. I received an Economic Impact Payment. Do I need to pay back all or some of the Payment if, based on the information on my 2020 return, I don't qualify for the amount I already received? (added August, 3 2020)​

​

A65. No, there is no provision in the law that would require individuals who qualify for a Payment based on their 2018 or 2019 tax returns, to pay back all or part of the payment, if based on the information reported on their 2020 tax returns, they no longer qualify for that amount or would qualify for a lesser amount.​

​

For example, you received $500 for your child who, based on your 2018 or 2019 tax return, met the qualifying child requirements. That child turned 17 in 2020 and no longer meets the qualifying child requirements. You will not be required to pay back the $500.​

​

Or, for example, you received $500 for your child whom you claimed on your 2018 or 2019 tax return. You do not claim the child on your 2020 tax return because the child’s other parent claims the child. You will not be required to pay back the $500 even if the child’s other parent claims $500 for the same child on his or her 2020 tax return. ​

​

Keep Notice 1444, Your Economic Impact Payment, with your 2020 tax records. The IRS will mail Notice 1444 to your last known address within 15 days after the Payment is made.​

​

I had posted on a thread a few days ago a similar answer the IRS provided to this situation but this updated one makes the IRS position even clearer. Do you still think after the above that the Dad might have to worry about repaying the stimulus payment? It seems pretty clear to me that won't be an issue.

 

[Zigner]

Based only on what was posted, we don't know that the OP qualifies to receive any stimulus money.

 

[Taxing Matters]

Based only on what was posted, we don't know that the OP qualifies to receive any stimulus money.

That's true. It should be obvious, however, that she cannot claim the EIP credit on her 2020 return if she is not eligible for it. If she is eligible for it, though, she will be able to claim that on her 2020 return. She does not lose it just because Dad got the advance EIP this summer.

 

[Zigner]

That's true. It should be obvious, however, that she cannot claim the EIP credit on her 2020 return if she is not eligible for it. If she is eligible for it, though, she will be able to claim that on her 2020 return. She does not lose it just because Dad got the advance EIP this summer.

Fair enough.

 

[LdiJ]

Correct. However, at the moment in this situation at least it appears the IRS position is that Dad wouldn't have to repay the wrongfully issued stimulus check. In a recently updated (August 3) FAQ on the stimulus (Economic Impact) payments, the IRS says the following:

Q65. I received an Economic Impact Payment. Do I need to pay back all or some of the Payment if, based on the information on my 2020 return, I don't qualify for the amount I already received? (added August, 3 2020)​

​

A65. No, there is no provision in the law that would require individuals who qualify for a Payment based on their 2018 or 2019 tax returns, to pay back all or part of the payment, if based on the information reported on their 2020 tax returns, they no longer qualify for that amount or would qualify for a lesser amount.​

​

For example, you received $500 for your child who, based on your 2018 or 2019 tax return, met the qualifying child requirements. That child turned 17 in 2020 and no longer meets the qualifying child requirements. You will not be required to pay back the $500.​

​

Or, for example, you received $500 for your child whom you claimed on your 2018 or 2019 tax return. You do not claim the child on your 2020 tax return because the child’s other parent claims the child. You will not be required to pay back the $500 even if the child’s other parent claims $500 for the same child on his or her 2020 tax return. ​

​

Keep Notice 1444, Your Economic Impact Payment, with your 2020 tax records. The IRS will mail Notice 1444 to your last known address within 15 days after the Payment is made.​

​

I had posted on a thread a few days ago a similar answer the IRS provided to this situation but this updated one makes the IRS position even clearer. Do you still think after the above that the Dad might have to worry about repaying the stimulus payment? It seems pretty clear to me that won't be an issue.

Ok, that is good to know. I am glad that they issued specific guidance. I did remember that you had posted a similar answer a few days ago which is why I worded my post the way that I did. It is great that they have now made the answer even clearer, although it is a bit surprising that they are taking that stance. There is a lot of every other year claiming of children by divorced or separated parents, so there is going to be a lot of duplication of the credit.

 

[Taxing Matters]

Ok, that is good to know. I am glad that they issued specific guidance. I did remember that you had posted a similar answer a few days ago which is why I worded my post the way that I did. It is great that they have now made the answer even clearer, although it is a bit surprising that they are taking that stance. There is a lot of every other year claiming of children by divorced or separated parents, so there is going to be a lot of duplication of the credit.

I believe the IRS and Treasury is taking that stance because, as a starting point, IRS Chief Counsel's Office has likely advised it that the CARES act itself provided no way for government to collect those improperly issued EIPs. That is the conclusion I too reached upon reading the Act. Thus, Chief Counsel would then have told the Commissioner and Treasury that without any authority in the Act to easily collect those wrongfully issued refunds there is only one possible avenue left in the Code to recover them: the erroneous refund procedure of IRC § 7405. It is a procedure that is not often used for two reasons. First, truly erroneous refunds are not terribly common. I encountered just two such situations in my entire entire career at IRS, at least that I can recall.

That then leads to two issues for the government. The first is cost and administrative burden. In order for the IRS to recover an erroneous refund, it must sue the person who received it in federal district court. It does not have the option to use the administrative collection procedures that the IRS may use for delinquent tax. Because the suit must be done in federal district court, the Department of Justice (DOJ), Tax Division would actually have to do the litigation, not IRS Chief Counsel. The cost to the government to pursue that would exceed the $500 (in the case of an erroneous dependent EIP) that it is trying to recover. Moreover, the government must initiate that action within 2 years of the date the erroneous refund was made. Because these payments were made 9+ months before the 2020 returns are even due, that leaves the IRS in the position of having to process returns, match them, determine that an erroneous refund was made, and then coordinate with DOJ to file the lawsuit all within the space of about a year or less. That's a lot work and expense to recover $1,200 or $500.

The second issue is one of policy. Would doing this be in the best interest of the government and the public? I think the conclusion would be no. The government is not going to want to take on that burden for these small payments and will be reluctant to flood the district courts with these small claims when the courts are already overburdened with cases. Particularly when the error that cause the refund in the first place was made by the government itself, not the taxpayer. And DOJ itself may not have the resources to spend on that given all the other litigation it has on its plate already.

Moreover, doing that would not be a good look for the government. The purpose of these payments was not some tax policy objective. The purpose was to stimulate the economy, and the use of tax refunds to do it was simply a fast and easy way to get the payments out to the public. I think the Treasury would be of the view that it is fine with letting those erroneous payments go uncollected. That's just more money to help stimulate the economy and would avoid the howls of those taxpayers who got those checks in tough times, spent the money for rent, food, or whatever, and would then be called upon to repay it to the government later when they might not even have the money to do it.