WASHINGTON — Most Americans in Texas and beyond will soon get checks worth up to $1,200 as part of Congress’ sweeping coronavirus relief package. But Isabella Rios will not be among those cashing in.
It’s not that the San Antonio native is too wealthy to qualify.
Instead, the 21-year-old University of Texas at Austin student will be left out of the financial aid — designed to provide a boost during the pandemic-induced economic slowdown — because she’s counted as an adult dependent on her mother’s tax return.
What’s more, Rios’ mother, Patricia, won’t receive the $500 per child-age dependent that is going to parents. It’s an issue she’s also facing with her 19-year-old daughter, Gabriella.
“It would really be for the basic necessities, like rent, utilities,” said Patricia Rios, a federal employee who will get a $1,200 check for herself. “I’m kind of squeaking by.”
The gap — which could also affect some high school students, along with some older and disabled Americans — highlights the blunt nature of the $2 trillion aid package that Congress passed last week to soften the economic blow of the growing COVID-19 outbreak.
Upwards of 30 million Americans could miss out on the payments because of how the legislation treats adult dependents, according to the Urban-Brookings Tax Policy Center.
The exclusion appears to result from an existing provision in the tax code dealing with child tax credits, along with how such stimulus checks have worked in the past. But the setup is still a head-scratcher for many tax policy experts, especially given the scope of the crisis.
“It’s not clear why you would exclude, say, a disabled person who is a dependent but include a 4-year-old child,” said Kyle Pomerleau, an expert at the American Enterprise Institute. “Both of these individuals increase the costs of a household and require parents to spend more.”
Even with the carve-out, most Americans will receive the direct aid.
The payouts, totaling more than $290 billion, should start arriving within weeks. The perk — $1,200 per adult and $500 per child under 17 — starts phasing out for people who make more than $75,000 a year or married couples who make more than $150,000.
President Donald Trump has hailed the payments as a way to “deliver urgently needed relief,” and some experts have praised the aid for generally targeting those with the most need.
But among those who are supposed to benefit are those who have little to no taxable income. That would, in theory, seem to include college students and other adult dependents — who, by definition, are not making much money and get most of their support from someone else.
The stimulus legislation, however, specifically bars payouts for dependents who are at least 17.
It’s unclear why, though Elaine Maag of the Tax Policy Center said, “Enough people were talking about it that we can assume it was intentional.”
A spokesman for the Senate Finance Committee said that “legislation is never perfect and always involves trade-offs.”
“The goal of the recovery rebates is to provide support for Americans who are responsible for their own financial well-being or that of another during this pandemic,” Michael Zona, the committee spokesman, told The Wall Street Journal.
Zona also noted that such eligibility criteria are already used each year to determine who receives child tax credits, and that they were also used for stimulus checks doled out in 2008.
But as a result, many in Texas and beyond will miss out on hundreds of dollars at a time of economic hardship. Consider the Rioses, the San Antonio family that won’t get checks for the two daughters in college.
Even though Isabella Rios, the UT-Austin student, helps pay for food, gas and other essentials with her own income, she’s counted as a dependent for tax purposes because her mom covers most of her tuition and rent. Ditto for her sister, who attends Texas A&M University.
The household won’t receive $3,600 — the maximum amount for three adults. It won’t receive $2,200 — the amount it would get if it received $500 for each of the daughters. Instead, it will get just the $1,200 for Patricia, the 56-year-old mother.
“Any money is completely essential to get her by month to month but also to get my sister and me by as well,” said Isabella Rios, whose father passed away four years ago.
Some individuals may be able to help themselves out by assessing their tax situations. (This advice could apply even to those who aren’t dealing with the dependent issue.)
The checks are supposed to be based on a person’s status in 2020. But those tax returns won’t be filed until next year. So the Internal Revenue Service will instead base the payouts on 2019 returns, which are due this year by July 15, or on 2018 returns if need be.
That means timing could be critical, especially as it will probably be a couple of weeks or so until the IRS cuts the checks.
“There are a couple of planning opportunities there to look and see if you qualify under one year and maybe not the next,” said Wade Chessman, a Dallas-based financial adviser who has two children who count as adult dependents.
Some individuals may find it advantageous to go ahead and file their 2019 returns.
Sage Foster, 19, is a McKinney native who attends UT-Austin. His parents claimed him as an adult dependent in 2018, meaning that return wouldn’t qualify him for a payout. But he covered enough of his bills last year to no longer count as a dependent.
He made a point this week to file his 2019 return, meaning he now should get the $1,200.
“That check would help,” he said, explaining that he has rent to pay in Austin even though he no longer has his job delivering pizzas.
If someone like Foster became independent only this year, as opposed to last year, he or she could still get a payout. The financial boost would just be delayed, coming next year when 2020 tax returns are filed.
Some others, however, may be better off waiting to file their 2019 returns.
Maag, the Tax Policy Center expert, pointed to a scenario in which someone has a child who was 16 on the 2018 return — and therefore eligible for the $500 check. That child would no longer be young enough to qualify based on a 2019 tax return, much less one for 2020.
So it could make sense for the parents to hold off filing their 2019 return, particularly since the stimulus package doesn’t include a clawback provision for payments that end up going out.
But Maag said it’s so far unclear how the IRS would treat that situation, since the agency knows people’s ages. The feds could use the dependent’s age on the date of the return being used to determine the credit, or they could use the age as of this year, she explained.
She also cautioned people against improperly messing around with their dependent status, which is determined by certain criteria. That’s doubly true, she said, because the limitation in the stimulus applies to those who could be — emphasis on could be — claimed as a dependent.