How Does Divorce Affect Your Potential Stimulus Check?
If you have been keeping up with the news, you have heard that Congress has approved a $2 trillion dollar stimulus package to minimize the adverse impact the coronavirus outbreak is having on the economy. In doing so, the government is planning to issue checks based on lost income as a result of the outbreak. If you are currently going through a divorce, or recently have been divorced, there are a few additional things that you may want to keep in mind.
The Stimulus Checks Are Based on Your Tax Returns
How does this affect you? If you were married, or your divorce case was in the system as of December 31, 2018, you must file your tax return as a married couple. Additionally, if you filed your taxes jointly in 2018, but divorced in 2019, you may want to consider sharing half of the stimulus check with your ex-spouse, if it was based on pre-divorce earned income. Why is this? Well, tax refunds are often shared between spouses, and are typically distributed as part of the marital equitable distribution scheme in a divorce (presumptively, 50/50). Therefore, because the money was earned due to marital efforts, it should be split equally between both spouses. Refusing to share a portion of the funds received from the stimulus check with your ex-spouse, could result in potential litigation. If the funds received from the stimulus check would have typically been money that your ex-spouse would have benefitted from, we urge to distribute the funds accordingly.
Note: If you have a spouse that is not willing to split the stimulus check with you, keep in mind that you are likely entitled to half of the check. It is important to consider however, if it makes sense financially to pursue legal action to obtain your share of the check. We always recommend engaging with legal counsel before making any decisions regarding property distribution or litigation.
What If You Are in The Process of Getting Divorced?
If you are currently in the process of getting divorced, this is a good thing to talk to an attorney about. It will be important to discuss how to negotiate which spouse gets the stimulus check, or how you spouse plan to divide the check once received. If you haven’t filed for 2019 yet, you should compare your 2018 and 2019 returns to see which return would result in a higher return. If your 2018 return will yield a higher income, then you may want to consider holding off from filing. However, if your 2019 return yields a higher income, then look to file as soon as possible.
Should You and Your Spouse Consider Filing Separately?
If you and your spouse or ex-spouse have a trusting relationship, and you feel confident that you both will be able to distribute the check equally, that is great. Alternatively, if you feel that you and your spouse or ex-spouse will not be able to come to an agreement on how to divide the funds from the stimulus check, you may want to consider filing your tax returns separately (married and separate, as opposed to married and jointly). Although this may result in having more tax liability, it will also allow for you and your spouse or ex-spouse to receive two separate stimulus checks and minimize the risk of conflict. Individuals making $75,000 or less can receive up to $1,200 and couples who make $150,000 or less can receive up to $2,400, plus $500 for any child under 17. For more information on the logistics of filing jointly or separately, we recommend contacting a certified accountant. Click here for a Stimulus Payment Calculator.
What About Payment for Kids?
The stimulus package provides an addition $500 check for each child that is under that age of 17. It is likely that whichever parent has been allocated to receive the tax exemption for the child, as part of your marital settlement agreement or parenting plan, will likely be parent to receive the exemption (there is no confirmation from the government yet on this, however, because the stimulus check is based on tax returns, it is presumed that the person designated for the exemption will receive the stipend for the child(ren)). It is important to determine with the other parent how best this money should be divided. If you cannot come to an agreement, you may consider engaging with legal counsel for help. Although, keep in mind the cost and benefit to doing so.
With any highly contentious areas surrounding divorce or child support, we always recommend reaching out to counsel to determine what your rights are, and how to proceed. If you have any questions, or are facing any of the issues above, please feel free to reach out to us, we would love to help.
