In an effort to blunt some of the economic impact of the COVID-19 pandemic, Congress passed and President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act on March 27, 2020.
This sweeping legislation provides, among other things, loans to corporations and small businesses, assistance to state and local governments for COVID-19 response efforts, and direct aid to hospitals and other basic services but perhaps no part of the CARES Act will have more of a direct economic impact than the approximately 300 billion dollars in direct cash payments to Americans.
About The Cares Act
All non-dependent U.S. Citizens and Lawful Permanent Residents will soon be entitled to receive a cash benefit of up to $1,200 per adult and $500 per child. There are income limits on how much an individual or family will be entitled to receive, which will be based upon 2019 income tax filings.
Individuals and families with incomes up to $75,00 per person, or those filing as head of household with an income of up to $112,500 per person (usually single parents), will receive the full amount of the benefit.
By most IRS estimates, this includes more than 80 percent of all income tax filers. For incomes above $75,000 per person (or $112,500 for head of household), the amount of the benefit is reduced by five cents for every dollar made above the income cap. For example, for an individual without children who made $80,000 according to his or her 2019 return, the benefit ($1,200) is reduced by $250 (five cents per dollar on $5,000, the amount above $75,000) for a total benefit of $950.
The cash benefit for children is not reduced by income, and every couple (or single parent) will receive the full $500 per minor child. As another example, for a traditional family of four making $150,000 or less with two minor children, that family will receive a check (or direct deposit) of $3,400 from the federal government.
Public reporting on the CARES Act suggests that the benefit will not be reduced for those who owe back taxes, but it will be reduced for those who owe child support payments, if the arrearages have been reported to the federal government.
How This Relates To Family Law
These rules beg the question: For divorced or single parents, who gets the $500 per child benefit? While many divorce judgments and custody orders contain provisions about who is supposed to claim the minor child on his or her tax return and when, the federal government will issue benefit checks based upon which parent claimed the minor child in 2019. For parents who have not yet filed 2019 returns, the federal government will look to which parent claimed the minor child in 2018.
What does this mean? For parents with joint custody, is it fair for one parent to have the “luck” of claiming the child in the odd tax year? Perhaps not.
For parents who alternate the child tax exemption, should the parent who gets the exemption in odd years rush to file their 2019 return if they did not claim the child in 2018? The short answer is yes, especially if this issue is not already covered by the express terms of a court order.
If a non-custodial parent claims the minor child(ren) on his or her tax return, will court intervention be required to obtain the CARES benefit from the other party? Likely so.
There is no specific state law in Michigan on this point, but it is likely that Michigan’s family courts will be hearing many arguments this summer and fall about whether the CARES benefit should be divided equitably among divorced or single parents instead of one-parent-take-all. If you have any questions about the application of the CARES Act to you or your family, contact Kelly & Kelly P.C. today.