For family law attorneys, stimulus monies and how they are to be divided has brought about a whole new set of legal questions that don’t have easy answers. Civilians have already expressed confusion with this most recent round of stimulus checks and, as with anything concerning divorce, it instantly becomes more difficult when children are involved. This article will help clarify your questions on dividing your stimulus check with your spouse if you were married at the time you received them.
When are there issues with stimulus checks?
The good news is if you do not have children, your stimulus is yours. Checks were sent out with a set dollar amount per person and as such need not be divided based on each spouse’s income. Some couples even received the two individual payments in the form of separate checks, which should make the division far easier.
The bigger issues arise when children and dependents enter the picture. In the past, lawyers helped clients calculate all of their child support related expenses using the mandated use of the North Carolina Child Support Calculator. Prior to 2020, child support related payments were largely determined by the parents’ wages and the number of overnights a child spends with a parent. The calculator’s results are definite, and rarely is there much room for negotiation. Given that this is the polar opposite of what is taken into account regarding stimulus checks, you may already be starting to see where the issue lies.
Which parent is allowed to claim a child as a dependent when filing income tax returns is often a topic of tense negotiation when parents are separating. Until the COVID pandemic, there has not been talk, discussion, nor disputes over stimulus monies. Who receives the stimulus money and how are stimulus monies divided are two questions that have just not been asked prior to 2020 and 2021.
Thus, family court judges do not have experience with these issues- nor do family law mediators or divorce attorneys.
How is stimulus money for dependents divided?
To muddy the waters even more, the rules for the distribution of stimulus monies has changed, from the first round of stimulus fund distribution from Spring 2020 to the third round for Spring 2021.
To recap: For the 1st round of stimulus money for unmarried parents, sharing joint custody, where the parents alternated from odd year/even year claiming the children as dependents, the IRS looked at both 2018 and 2019 income tax returns. It was possible that both parents could have received stimulus money.
For the 2nd round of stimulus money, the IRS only looked at 2019 returns. So, the parent who had taken the even year claim likely missed out on the money allotted for the minor child. However, that parent could possibly receive a tax credit when filing his or her 2020 return.
For the 3rd round of stimulus money, there are new guidelines and a much boarder definition of who is a dependent. For the 3rd round, dependents can be of all ages. Dependents now include a child under 19, a student under 24, and a qualifying relative who relies on the taxpayer for care. There is a new sharper income cutoff for the 3rd stimulus, but likely 85% of all US households will qualify for this third round of assistance.
For taxpayers who made much less money in 2020, remember to file your 2020 return as quickly as possible if you haven’t already. The IRS is reviewing the most current return, so hopefully the IRS can see your “poorer” status so you are eligible to receive more money if you need it. Also note, if you had a child born in 2020, check your eligibility to receive the $500 per child/1st stimulus and $600 per child/2nd stimulus monies.
In divorce law, it is difficult to revisit and renegotiate a separation agreement about child support. It will take time for the courts to navigate how to address these stimulus money related issues, but moving forward, family law and divorce discussions should address how to distribute these monies between parents.
