Sometime in late May, my Social Security check will be deposited into my checking account. My estate is not entitled to keep that check if I was not living on May 1st.
What’s the survival rule with COVID payments? Is there a cutoff date? One of my cousins died earlier this month. Will she get a check? Is her estate entitled to keep the money when it arrives? What about children that were recently born and were not declared on a 2018 tax return? Is there a $500 payment for them?
>What about children that were recently born and were not declared on a 2018 tax return? Is there a $500 payment for them?
The checks that are being distributed right now are “advance payments” of a 2020 tax credit. The amount of the advance payment is based on what was entered on either the taxpayer’s 2018 or 2019 return. When the taxpayer files their 2020 return, the final amount of the credit will be calculated based on what is listed on their 2020 return and then the advance payment subtracted (but not less than 0, so no repayments of overpaid advance payments).
So, if the taxpayer has children who are listed on their 2020 return but didn’t get listed on their 2018/2019 return, they will get the extra $500 per child when they file their 2020 return. Conversely, if there were eligible children on the 2018/2019 return who are not on the 2020 return, the taxpayer will not have to return the money.
An interesting corollary: Mom and dad are divorced and take turns claiming their child every other year. Mom claims child on her 2019 return and gets $500 advance payment in 2020. Dad then claims same child on his 2020 return, he also gets $500 for the same child in 2021. Mom does not repay the advance payment she received.
Obviously, the law and regulations were written in haste.
OP here. It seems a bit arbitrary that the date is determined by the receipt date. If two people die on the same date, but one has already received his payment by direct deposit gets to keep it, but the one who has yet to receive his payment by check must return it.
Suppose a man and his 2-year-old daughter were killed in a car accident on March 15th. His estate gets to keep the $500 allocated to the child, but must return the taxpayer’s $1200.
In the case of my cousin that died last Monday (May the fourth be with her), she did have the Coronavirus in a nursing home (which may-or-may-not have contributed to her demise), but had not yet received her COVID payment.
Note that a Q&A on the IRS web site is not a regulation and does not carry any authority of law. I have seen things posted on the IRS web site that were just blatantly wrong. I have not seen any regulation that actually addresses the issue and would like to see the reasoning behind this answer. Until then, I am skeptical.
In the case of the man and daughter who were killed, remember that the $500 belongs to the man, not the daughter, it is a payment to the man for having a daughter. So if we follow the answer to its logical conclusion, it would seem that the full $1700 would have to be returned.
You want to see another timing issue in this stimulus? Let’s say two taxpayers, Edgar Beavers and Schlomo Poker both have daughters who turn 17 on December 31, 2019. They both claim their daughters on their 2018 and 2019 tax returns. Edgar filed his 2019 tax return in Jan 2020. Schlomo is waiting until July 15, 2020. Edgar won’t get the $500 payment for having a child, Schlomo will.
Why? Because when the stimulus checks were handed out, Edgar’s 2019 return was on file, so they based his payment on his 2019 return when his daughter was no longer eligible. But since Schlomo’s 2019 return was not yet filed, they based his payment on his 2018 return on which his daughter was still eligible.
Yes, the law was written in haste.