How Can COVID-19 Relief Affect Tax Issues During Divorce?

 Posted on June 21, 2021 in Taxation Law

The coronavirus pandemic has affected many people’s finances, but fortunately, different forms of relief have been made available from federal and state governments. While this has provided many people with benefits allowing them to meet their financial needs, it may also complicate certain matters. Couples who are going through a divorce will need to determine how COVID-19 relief may affect them, including whether they will be able to receive stimulus payments and claim tax credits. When addressing issues related to divorce and taxes, it is important to work with an attorney who can explain the laws and ensure that the decisions made are financially beneficial.

COVID-19 Stimulus Payments and Tax Credits 

Most people received multiple stimulus payments in 2020 and 2021 that were meant to address the ways that the COVID-19 has affected the national economy. These payments were treated as “recovery rebates,” and they functioned as a prepayment for tax credits that could be claimed when filing an annual tax return. The initial stimulus payment for individuals with an income of $75,000 or less was $1,200, and married couples who earn less than $150,000 received $2,400. Families were also able to receive a stimulus payment of $500 for each dependent child. Additional stimulus payments of $600 per individual were sent out in December 2020 and January 2021, and a third stimulus payment of $1,400 per individual, plus up to $1,400 per child, was sent in March 2021.

Couples who got divorced in 2020 or 2021 or who are currently involved in the divorce process may need to address issues related to these stimulus payments and tax credits. Typically, stimulus payments received while a couple was married are considered marital property, and they will need to be included in the property division process. If any stimulus payments were not received, they may be claimed as credits on a tax return, and a couple’s divorce decree may specify whether a spouse may be able to claim these credits or whether they will divide tax refunds for 2020 or 2021.

If a couple has children, stimulus payments for a child are paid to the parent who claimed the child as a dependent on their taxes. In addition to deciding which parent will be able to claim which child as a dependent in certain years, a divorce decree may address whether either or both parents will be able to claim stimulus payments or tax credits based on the children they have claimed as dependents.

Contact Our San Jose, CA Tax Law Attorney for COVID-19 Stimulus Issues

While issues related to COVID-19 stimulus payments have been fairly straightforward for some people, these matters can quickly become complicated for divorcing spouses and divorced parents. To ensure that you will be able to receive the tax credits you deserve, you can consult with the San Jose tax lawyer at John D. Teter Law Offices. To set up a consultation and learn how we can help you address issues related to taxes and divorce, contact us at 408-866-1810.

Sources:

https://www.jdsupra.com/legalnews/implications-of-the-cares-act-for-87537/

https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments