Stimulus Checks & Divorce: Taxes, Spousal, and Child Support Issues

On March 11th President Biden signed the most recent round of Covid-19 relief legislation (American Rescue Plan Act of 2021), which included another round of stimulus checks and other tax changes. In this article, I’ll be discussing the stimulus checks and what issues may arise for separating or divorced parents and then check back next month for part two for more information on the tax changes that also accompanied this bill.

How Much Will I Get?

The coming stimulus checks are larger for adults than in the first two rounds. Each eligible adult will receive $1,400, compared with $1,200 last March 2020 and $600 in December 2020.  The same income thresholds still apply $75,000 for singles, $112,500 for head of households, and $150,000 for married couples. However, the check amounts phase out faster if you’re above those levels. This means individual taxpayers earning more than $80,000, head of household earning more than $120,000, and joint filers making over $160,000 are excluded from getting any stimulus payments. Where we saw the biggest increase is for children and other dependents.  This round includes $1,400 for each dependent child and adult dependent, which includes college students.  This money is still essential for many families as the country is still shut down in many places, and unemployment is still very high. This need can be even greater for separating or divorced parents since they need to maintain two households instead of one. However, as we saw with the first round of payments, there are unique challenges for these households, especially related to the stimulus checks for dependents.

Check to See Where Your Check Is Being Deposited

Depending on where you are at in the divorce process and how you last filed your taxes, it’s possible that your stimulus payment could have been deposited into your spouse’s bank account, so if you believe you qualify, you’ll want to look into that to make sure that you receive the correct amount of stimulus check. If you want to check the status of your 2021 Economic Impact Payment, you can do so in the Get My Payment tool on the IRS website and see whether your stimulus check may have been deposited into your spouse’s bank account.

Dependent Stimulus Checks

Where the more difficult issue arises can be with the stimulus checks for dependents. Whoever claimed the child as a dependent on their last filed taxes, which could be 2019 or could be 2020 if you’ve filed already, will be sent the stimulus check for the child(ren), and who should receive it would certainly depend on what’s in your marital settlement agreement as to who claims the child(ren) This means that if you and your ex alternate who takes the child(ren) as a deduction, which is especially common when there’s only one eligible child, then only one of you will get that check. Additionally, since students younger than 24 years old are included in this round, you may receive a stimulus check for a dependent that you didn’t before and one that may not even be referenced in your original agreement.

Communication Is Key

Hopefully, you and your ex have open communication lines and can discuss who received the stimulus check(s) and how those should be split and reach an agreement on what makes the most sense.  Maybe that’s that both parents share it equally, or maybe one parent is in more need at this time if they’ve been laid off or their income has decreased. Or if neither parent feels they need the income individually, maybe it’s something the parents agree to put into a college account or other savings for the child to access. Unfortunately, not all separated or divorced parents have the ability to communicate effectively with each other and might not agree on who should get those funds. This also isn’t an issue to litigate as the litigation cost will far exceed the stimulus payments. My best suggestion would be to try and communicate with your ex, and if needed, mediation would certainly be a lower-cost option than trying to litigate.

Stimulus Checks & Child Support

For the first and second rounds of stimulus checks, it limited offsets to past-due child support. This meant if owed, your payment could have been offset to pay your spouse’s past-due child support, so it went directly to them instead of you. It did, however, take time for the IRS to issue that check to the non-liable spouse. However, with this round of checks, if you’re past due on child support, you can still receive your full stimulus payment. It won’t be redirected to cover late support payments as the first two rounds had been

If you and your co-parent are having difficulties figuring out how to divide the recent round of stimulus checks and you are unable to have that conversation on your own, contact us to see how mediation may help. Call West Coast Family Mediation Center at (858) 736-2411 today!

 

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