What Happens to a Coronavirus Stimulus Check that Arrives During a Divorce?

IRS refund check and 1040 tax form

The global coronavirus pandemic is a truly unprecedented event in modern history. It has caused extensive upheavals across Missouri, the United States, and the world. Much of our society has slowed to almost a halt as people practice “social distancing” in an effort to slow the virus’ spread and allow the healthcare system time to care for those who have fallen ill. Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in late March. With more than $2 trillion in loans, grants, tax credit and rebates, and other benefits, it is the largest economic stimulus package in U.S. history. Some of its provisions directly affect Missouri residents, providing economic relief in the form of direct payments. What happens, though, if someone is going through a divorce in Missouri at this time? Here is what you need to know about CARES Act benefits and Missouri divorce law.

What Is the 2020 Recovery Rebate?

The bill provides tax rebates for individuals and families. They are officially known as “2020 recovery rebates,” but they are more commonly referred to as stimulus payments. They are technically tax rebates, meaning that the amount received is credited against federal income taxes owed in the next tax year. Since the CARES Act makes the rebates fully refundable, they are available to many people as direct cash payments.

How Much Is the Payment?

The amount of the stimulus payment is based on information contained in a person’s federal income tax return from 2018 or 2019. The maximum payment amount through the program is:

  • $1,200 for individuals;
  • $2,400 for married couples who filed a joint return; and
  • $500 for each minor child residing in the household.

A married couple with three minor children could therefore expect to receive a payment of up to $3,900. The CARES Act sets maximum limits on income, however.

The amount of the payment goes down if a person or couple’s adjusted gross income (AGI) on their last tax return is above the following amounts:

  • $75,000 for a person who filed a single return;
  • $150,000 for a couple who filed a joint return; or
  • $112,500 for a person who filed as head of household.

The reduction is equal to five percent of the difference between AGI and the above amounts. Suppose the couple described above had AGI of $200,000 on their most recent tax return. Their stimulus payment would be reduced by five percent of the difference between their AGI and $150,000, or $2,500. Instead of the maximum payment of $3,900, they would receive $1,400.

The reduced amount cannot go below zero. If a single person has AGI of $100,000, the reduction amount would be five percent of $25,000, or $1,250, which is greater than the maximum payment amount. They would not receive a stimulus payment.

Marital Property in a Missouri Divorce

To review a bit about marital property under Missouri law, anything acquired by spouses during their marriage is considered marital property, unless it falls into one of the following categories:

  • Property received as a gift, or through inheritance;
  • Property acquired solely using property owned before the marriage, or obtained by gift or inheritance;
  • Property acquired after a legal decree of separation; or
  • Property that both spouses have agreed — in writing — is not marital property.

Missouri courts presume that any property acquired during the marriage is marital property. The spouse claiming that something acquired during the marriage is not marital property has the burden of proving it.

CARES Act Payments During a Divorce

Under the criteria described above, CARES Act stimulus payments are marital property because they are based on a couple’s most recent joint tax return. A pending divorce case does not change the status of the payment as marital property. The rather rapid distribution of these payments, along with the generally chaotic environment in which we all find ourselves, raise some important questions about what might happen during a pending divorce.

Who Receives the Payment?

For a couple with AGI of $150,000 or less, $2,400 might not change their lives, but it could help cover important expenses during difficult times. During a divorce, both spouses have the right to those funds.

The IRS has stated that it is using the contact information provided in taxpayers’ most recent returns to send the payments. This could be a direct deposit to a bank account or a paper check mailed to a last-known address. The IRS provides an online tool to track stimulus payments. If a person has not received their payment yet, they might be able to designate a bank account or address.

How Is the Payment Divided Between Spouses?

The fact that the stimulus payment is marital property does not necessarily mean that it must be divided 50/50 between the spouses. It does, however, mean that one spouse should not withhold the payment, or information about the payment, from the other spouse.

If a party to a divorce case believes their spouse has misappropriated the stimulus payment somehow, they should consult with a divorce attorney. It could be an issue that will affect the overall division of property in the case.

How Is the Payment Allocated Among the Children?

This is a question that has no clear answer. The CARES Act simply allots $500 for each minor child in a household, before any reductions in the total amount. It does not state that parents or guardians must spend or invest that $500 for the benefit of that child. Still, the fact that Congress specifically set money aside based on the number of minor children could carry some weight in a divorce case.

So What Should I Do?

As with so many things in a divorce case, keeping good records is of the utmost importance. Document when you receive the stimulus payment and the amount received. If your spouse received it because it went to their address or a bank account they control, you may be able to document that using the IRS’s online tool. This information can be very helpful for your lawyer and the court.

Kansas City family law attorney Mark A. Wortman focuses his practice exclusively on divorce and other family law matters. Please contact us today online or at (816) 523-6100 to schedule a confidential consultation to see how we can help you.