Flattening The Economic Curve: The High Points Of Coronavirus Tax Relief

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Jason B. Freeman

Jason B. Freeman

Managing Member

214.984.3410
jason@freemanlaw.com

Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine , a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

As previously posted on Forbes.com.

Flattening The Economic Curve: The High Points Of Coronavirus Tax Relief

The novel coronavirus pandemic may be unlike anything that we have ever seen.  And so it stands as a living, breathing crucible through which to test Newton’s well-known proposition: that for every action there is an equal and opposite reaction.  Indeed, the Congressional response to the careening economy left in the pandemic’s wake is, for its part, unlike any that we have seen in modern times.  It is nothing short of the largest economic relief bill in American history.  But will it be enough?  Only time will tell.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act—better known as the CARES Act.  With the economy teetering on the brink of recession and businesses reeling from commercial stagnation, Congressional delegates came together for long enough to all-but-unanimously support a 2-trillion-dollar economic-relief package.  After passing in the Senate by a 96-0 margin, the measure was adopted by the House of Representatives through a voice vote with minimal dissension in its ranks.  The Act employs an array of tax breaks, retroactive amendments to the Tax Cuts & Jobs Act of 2017 (the “TCJA”), immediate rebates, and expanded loan relief to small businesses designed to incentivize employee retention.  This article will hit the high points—broader analysis of its provisions will come in the days ahead.

Individual Rebates.  The highlight for many individual Americans is the CARES Act’s so-called “advanced recovery rebate.”  It works like this: Americans who file single, head-of-household, or married-filing-separate tax returns are entitled to an advanced rebate of $1,200, unless they are subject to the phase-out rules that are described below.  Couples filing on a married-filing-jointly basis are entitled to a rebate of $2,400.  Taxpayers can tack on an additional $500 for each qualifying child, which generally means tax dependents who are under the age of 17.  The rebates will be paid “automatically,” with many Americans simply receiving a deposit in their bank account.

But the phase-out rules—a manifestation of that trite truism that what Congress giveth, Congress taketh away—may rain on a rebate-expecting taxpayer’s parade.  Under these rules, if a taxpayer makes a threshold amount of money (technically, has an “adjusted gross income,” or “AGI” in tax jargon, in excess of a specified amount), then the promised rebate is reduced, eventually to zero.  Generally, the IRS will apply the phase out based on the taxpayers’ 2019 tax year if a return has been filed or 2018 if no return has been filed for 2019, although there may be exceptions for certain taxpayers.

Here is how the phase out works: For an individual who files a single or married-filing-separate tax return, the phase out begins when they make (technically, have an AGI of) more than $75,000.  The rebate is reduced by $5 for every $100 over this phase-out threshold.  So, if this individual taxpayer makes $99,001, the individual rebate is completely “phased out.”