How Does Divorce Complicate Economic Stimulus Payments?

 Posted on August 01, 2020 in Finances and Divorce

With many provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed back in March expiring and the economy still suffering, Congress has started negotiations on additional legislation to relieve Americans facing financial burdens. While the Senate Republicans have the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act and the House Democrats have the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act—all differing vastly in how to provide aid—there are two things that almost every politician agrees on:

• The country needs additional emergency assistance from the government to weather this storm and somehow stay afloat.

• Direct payments in the form of stimulus payments, similar to those allocated in the CARES Act, might be the quickest, most efficient way to provide citizens with immediate relief.

As government leadership wades through the details and attempts to reach agreeable compromises on this supplemental support, it may be a good idea to review the challenges divorced couples faced with the CARES Act stimulus payments. From no payments, incorrect payment amounts, and “lost” payments to child support and dependent payment complications, divorce made many stimulus payments more of a hassle than a help. 

How Getting Aid Payments When Divorced Stimulates Problems

Here is a closer look at the ways divorce made stimulus payments more challenging in hopes that the next set of these cash infusions will be handled more smoothly:

• No Payments—Depending on how you and your spouse filed your taxes, your spouse might have received the full stimulus payment and failed to share it with you per the divorce decree’s division of property stipulations.

• Wrong Payment Amounts—Your divorce probably disrupted the government’s formulas/algorithms for determining payment amounts, which might have caused you to be paid too much, too little, or nothing at all.

• “Lost” Payments—Your bank account on file with the IRS might have been the joint account with your former spouse, which you closed after your divorce. According to the IRS, the only effective way to remedy a “lost” payment sent to a closed account is to claim a credit on your future tax return. Fortunately, the second round of direct stimulus payments will give you the opportunity to properly update your bank information with the IRS.

• Child Support “Offsets”—If you have ever been behind on your child support payments, you know that, if applicable, the Treasury can impose “Administrative Offsets” on your tax refunds to recoup missed payments. The hope is that, as with the House Democrats’ HEROES Act, the second round of stimulus payments will be protected from offsets like Social Security benefits.

• Incorrectly Allocated Extra Payments Due to Dependents—If you and your former spouse are like many divorcees with kids and have shared child custody, you probably alternate the years that each of you claims your child/children as dependents on your tax returns. This put a wrench in the Department of the Treasury’s system, leading to unintended “double-dipping,” with both parents receiving the extra $500 in stimulus payments per dependent. In other cases, based on your respective tax returns, your former spouse might have received the extra payments without having any parental responsibilities.

Contact a DuPage County Divorce Attorney

Another set of direct stimulus payments from the federal government could be headed your way as early as August. If you have questions about how divorce affects these payments or any other family law concerns, reach out to a knowledgeable Wheaton, IL child custody lawyer at 630-871-1002 for a free consultation to get the answers and advice you need. The skilled professionals at Andrew Cores Family Law Group have the knowledge and compassion necessary to help you through these adverse times.

Sources:

https://www.forbes.com/advisor/personal-finance/second-stimulus-check-calculator-heals-act-proposal/

https://www.foxbusiness.com/personal-finance/divorce-missing-stimulus-payments

https://www.washingtonpost.com/business/2020/05/12/one-child-two-stimulus-payments-weird-way-divorced-families-are-double-dipping-without-even-trying/