Millions of Americans have or will soon have their "stimulus check" from the U.S. government, but for divorced parents, there are some nuanced questions about who is entitled to the funds. The emergency money is meant to help Americans overcome the financial burdens of the coronavirus pandemic, including an addition $500 for children under the age of 17. For parents who are separated, receiving, allocating and sharing this money may be a burden.
The "stimulus check" or Economic Impact Payment coming to most Americans this spring is a part of the CARES Act, and is meant to offset the economic stress of the coronavirus pandemic. It is being sent out by the IRS using the information on file from a couple's 2018 or 2019 tax filings — which ever is more recent. For those that got divorced recently, this could mean that their finances were entangled the last time the IRS got banking information from them.
Even for those who have been separated for a while, there are some considerations to look at. Parents will have to consider how to divide the $500 payment for their child, and there is very little legal precedent for something like that. Divorce attorneys and financial advisers are scrambling to find a consistent and fair way to make sure everyone gets what they need out of these payments.
It is worth noting that, while they are commonly referred to as "stimulus checks," these payments are not meant to "stimulate" the economy to get moving again. Rather, they are meant to relieve the burdens put on millions of Americans by unemployment during this crisis. Experts agree that parents should take whatever action is best for their children with this one-time payment. Here is a breakdown of what divorced parents may need to consider when receiving their coronvirus stimulus check.
Who Will Get What
First of all, parents may have some difficulty in figuring out where the money from their stimulus check is going to go. Those that received their last tax return by direct deposit likely already got the money, while those who got a paper check in the mail may be waiting for a few weeks.
In the case of parents who have been filing taxes separately, many take turns claiming their child as a dependent every other year. In that case, whoever claimed the child most recently will get the $500 addition to their check to care for the child. To avoid any confusion, both parents should file their 2019 taxes as soon as possible. Hopefully, co-parents with good relationships will be able to talk about how that $500 should be spent without intervention.
If it comes down to it, there is a case to be made that ex-spouses may have entitlement to each others' stimulus checks. According to a report by NJ.com, tax refunds are typically included as an asset in divorce litigation, and are therefore subject to being redistributed in a divorce settlement. For couples who are in the midst of a divorce and are still filing joint taxes, that may be the best route.
"Working from that premise, it would be fair to anticipate that each party would be entitled to receive 50 percent of any stimulus check received regardless of whose bank account it is deposited in — if the total stimulus check was based on the family status pre-divorce," said matrimonial lawyer Kenneth White.
Couples with pending divorces will have the most hoops to jump through when it comes to their stimulus checks. Family law attorney Jeralyn Lawrence told NJ.com that couples should be sure to address stimulus check money as a part of their agreement so that there is no confusion. Lawrence also said that these couples should prioritize getting their taxes done and doing them accurately, then using the IRS' Get My Payment app to find their stimulus check and cash it.
"The quicker you can get the payment and the most money you can get back from the IRS is always the preferred outcome," Lawrence said.
While there is no clear precedent to go on for seizing an economic impact payment from an ex, Lawrence warned that lawyers would get involved if asked, and it might cost more than a couple was hoping. In the end, it might not be worth it to engage a lawyer of such a relatively small sum.
"They need to make a business decision on whether it is worth engaging an attorney over the amount of money at issue," said Lawrence.
The IRS is not deducting back taxes or other debts from the Economic Impact Payments, and most banks are prohibited from doing so as well. In most cases, Americans do not have to worry about having their stimulus check seized by creditors, but child support is the big exception.
Garrett Watson, senior policy analyst for The Tax Foundation, said that it does not appear that the CARES Act stops child support agencies from collecting the Economic Impact Payment for overdue child support. However, he said that "it would varies by individual circumstances and likely the state of residence. Some states may be more aggressive than others on collecting, and inter-state coordination for parents living across state lines is patchy."
A record-high number of Americans are now claiming unemployment, and the Economic Impact Payments are, first and foremost, meant to ease the burden that is causing on individuals. Therefore, in a case where one or both people in a divorced couple are unemployed, the question of who is entitled to portions of whose stimulus check becomes even more fuzzy.
White said that he has been receiving a lot of questions about alimony and child support, with parents asking if they can get a break on paying those two settlements due to unemployment, and others asking if they can still pursue those payments from their ex if they are unemployed. In every variation of these cases, White said: "it depends."
In general, White said the law prevents individuals from getting financial relief from a support obligation due to a temporary situation — including unemployment. However, in these extreme cases, there may be situations where exceptions are made, especially for long-term unemployment.
"Unemployment for a period of three or more months may entitle someone to secure financial relief," he said.
Custody in Quarantine
Finally, Lawrence said that many people are asking about whether social distancing protocols should be allowed to effect their custody agreements during this crisis. Divorced parents may be weary of handing their child over for a weekend at a time when experts advise complete social isolation. Lawrence said that parents should do their best to follow court orders, but put their child's safety above all else.
"I have recommended that court orders are to be followed. The executive order must be followed as well as social distancing," she said. "As soon as someone is sick or showing signs of symptoms, they must self-quarantine and protect their children from exposure. Always keep the child's best interest as your primary and paramount concern."
To get updates on your Economic Impact Payment, visit the IRS' Get My Payment website. For the latest on the coronavirus pandemic itself, visit the websites of the CDC and the World Health Organization.