The stimulus payments authorized by Congress this past spring have been a lifeline for many individuals and families dealing with the fallout from the COVID-19 pandemic. The relief payments of $1,200 for individuals, $2,400 for married couples, and $500 for qualifying children have helped those who lost their jobs due to the crisis to pay rent, buy food, and support their children.
What happens when a couple splits up, though? How does a divorce or separation affect the division of these essential funds, and what effect do children and their needs have on this calculation? Halligan LLC can help you and your family answer these uncertain questions and develop a solution that works. We handle all aspects of divorce and separation and the effects that they have on families and children. Call us today at (720) 608-2361 for a confidential consultation to discuss your concerns.
Dividing the Stimulus Payment in a Separation
The stimulus payment is a tax refund, and it provides $2,400 for couples filing their taxes jointly. This payment will be deposited into the account that was provided to the IRS on your tax return. Ideally, you and your spouse will be able to agree to split the payment equitably. You could split the money evenly, or if one or both of you are in a precarious financial position, you may wish to take this into account when deciding how to divide the stimulus payment.
Your decision may become more complicated if you have children. Dependent children under 17 as of December 31, 2020, each qualify for an additional $500.
What if the divorce is contentious, however? Are there any rules regarding the division of the stimulus payment in a divorce where neither side can come to an agreement on how to split the family’s finances?
How to Handle the Stimulus Payment in a Contentious Divorce
The stimulus payment is considered a tax refund. Its amount and where it is sent is based on the information filed in your 2019 taxes, or on your 2018 return if your taxes for 2019 were not yet filed at the time of the payment. Generally, in divorce settlements, tax refunds may be considered assets subject to equitable distribution. Your divorce decree may actually contain a clause regarding the sharing of tax refunds for previously jointly filed tax returns. This could provide some guidance to both parties for dividing these funds, as well as possible future stimulus payments.
It’s important to keep in mind that if the two parties are unable to come to an agreement and you are already divorced, the amount of the stimulus payment may not be worth another legal battle. An experienced divorce attorney can guide you in the right direction and may be able to point out the best way to recover these funds.
Frequently Asked Questions About the Stimulus Payment and Divorce Settlements
Your lawyer and/or CPA are the best sources for information about the details of your situation, but here are a few answers to frequently asked questions that may be helpful.
Are stimulus amounts reduced for past-due child support, taxes, or debt collectors?
Per the CARES Act passed by Congress, which established the stimulus payments program, the money can only be withheld for past-due child support. It is not taxable income, and it is not subject to other Federal or state debts. It is important to note that once the money has been deposited into a bank account, it is not protected from garnishment by creditors.
If the other parent and I alternate claiming our child on our tax returns, who gets the stimulus payment allocated for the child?
According to the IRS, the parent who last claimed the child on their taxes (2019, or 2018 if 2019 taxes haven’t been filed yet) will receive the stimulus payment. How you and your ex decide to allocate the money is a matter that you can settle together, or might be covered in the divorce/child custody matter decree.
If one parent owes child support or maintenance, can the receiving parent recover the money through stimulus funds?
Normal rules for payment of child support still apply. In fact, if the delinquent child support has been reported to the U.S. Treasury, the amount of the stimulus sent to the parent who is delinquent may be reduced in order to cover the past due amount, according to the Colorado Office of Economic Security’s Child Support Office.
If I received the other party’s stimulus payment, do I have to forward it to them?
If you filed a joint return in 2018 or 2019 but later got divorced, the money from the stimulus should ideally be split equally—each individual should receive $1,200 of the total $2,400 payment. The CARES Act refers to the payment as an amount given to an individual. If you are separated and the full amount of $2,400 was deposited into your account, half of that amount technically belongs to the other party, and it may not be legal for you to keep the money. If the other party has the payment and will not release it to you, you may wish to speak to your lawyer about the best way to recover it. You may wish to contact a CPA for specific advice about the law regarding tax refunds.
Speak With a Colorado Divorce Attorney Today
Divorce is a difficult and emotionally stressful situation to go through under normal circumstances, and it can be even harder during uncertain economic times like this. The family law attorneys at Halligan LLC can help you navigate the complexities of Colorado family law and will work tirelessly to reach the best possible resolution for you and your family. Call us at (720) 608-2361 or fill out our contact form today to schedule a confidential consultation.