The CARES Act, which was passed in March, gave much-needed financial support to people struggling due to the pandemic. It was a well-drafted legislation, but it wasn’t without loopholes. One such loophole allowed some parents to claim $500 dependent payment each for the same child with their coronavirus stimulus check.
Coronavirus stimulus check: a loophole for some parents
This loophole basically applies to parents who are separated or divorced and share joint custody of the child. Such a scenario alone does not qualify parents for the dependent payment, rather the way they file their taxes decides if both parents get the dependent payment or not.
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Generally, it is the noncustodial parent who pays for child support to the custodial parent. The custodial parent then claims the same in their tax return. However, in some instances, child support is owed even when parents share custody, like when one parent earns much more than the other.
Usually, in such cases, the parents claim the child on their taxes alternatively, like one parent claiming it in odd years, and the other in even years. In such situations, it is possible that the $500 dependent payment is sent to the parent who is owed back child support, while the other gets nothing.
If this is the case, then the parent who didn’t get the dependent payment can claim the payment with their 2020 tax return. This way they will get the $500 along with their refund in 2021, notes a report from CNET. Experts say this loophole is actually not a loophole; rather both parents technically qualify for the $500 dependent payment.
Can states deduct child support from stimulus payment?
Another question that many parents have is if states can deduct child support from the stimulus checks. Though your stimulus check was prevented from being taken to pay debts such as student loans and back taxes, the overdue child support was an exception.
This means, if you owe more than $150 in arrears, then your state can legally garnish some or all the arrears from your stimulus check.
“And if you're owed child support, you may receive money garnished from your child's other parent, although how long it takes to get to you depends on a lot of factors,” CNET says.
If you have confusion about your first stimulus check amount over these two points (child support debt and additional dependent payment), you can clear up the confusion by visiting the website or giving the IRS a call. You can call the IRS at 800-919-9835 or 800-829-1040.
As of now, it is not clear if the next stimulus package would follow the same rules or not for the dependent payment. There have been proposals both for and against such rules. For instance, the Democrats-backed HEROES Act prohibits reducing the check by the child support debt. The Senate's HEALS Act, on the other hand, allows states to deduct child support debt.