By Richard Rubin 

WASHINGTON -- The government is preparing to send one-time payments to most Americans to help them cope with the coronavirus outbreak, but that is little comfort for many college students and adult dependents who are left out.

The economic-relief law signed by President Trump on Friday provides $1,200 to most adults and $500 for children under age 17. That money -- $292 billion -- will start flowing within weeks from the Internal Revenue Service into bank accounts. People with little or no income can qualify, which means money will flow to retired people and people who don't normally file tax returns. The benefit phases out for individuals with income above $75,000 and married couples with income above $150,000.

However, the plan excludes anyone who isn't a child and who can be claimed as someone else's dependent. Who is in that group? Some high-school students, college students and some disabled and elderly people, many of whom show up on the tax returns of the people they live with who provide most of their support.

They won't get money directly, and no one will get money for them. In all, that is about 21 million Americans, according to the Tax Policy Center. Immigrants who don't have Social Security numbers also aren't eligible.

"That [$500] could be a month's worth of food," said Fern Maklin, 71 years old, who is a dependent of her daughter and son-in-law in Palm Harbor, Fla., and contributes her Social Security payments to the household. "The stress and the anxiety, we try to keep it low key, but it's there."

Parents and adults who have those dependents will still be able to claim the $1,200 for themselves. They just won't get an additional $500 for each of those dependents.

"Dependents, by definition, aren't responsible for a majority of their financial support," said Michael Zona, a spokesman for the Senate Finance Committee, which wrote the legislation. "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."

The definition of who gets $500 is similar to the one that is used for annual tax credits to create a distinction between children under 17 and others.

Lawmakers based this week's bill on similar payments made in 2008, which also excluded the same group of non-child dependents.

"Legislation is never perfect and always involves trade-offs," Mr. Zona said. "That is especially true of emergency legislation in the midst of a crisis. Using existing mechanisms already in place saves time when every moment matters."

Congress is already starting to work on the next round of its response to the virus outbreak, and some advocates are pushing for broader payments.

"Behind a welcome bipartisan push, the stimulus rebates are broad and rightly include very poor families," said Chuck Marr, senior director of federal tax policy at the left-leaning Center on Budget and Policy Priorities, who said non-child dependents and immigrants without social security numbers should be added. "Many of them are on the front lines, delivering food and caring for the elderly."

Travis Miller, a teacher in Nashua, Iowa, said he couldn't understand why he would get a payment for his 16-year-old son but not for his 18-year-old daughter.

"It doesn't make or break our household as far as money goes," he said. "To me, it's more of a principle thing. If we are going to give money out to people in general, why are we not giving it out to all people?"

The IRS hasn't yet provided details about how it will administer the new provision. The IRS will be basing payments on 2019 tax returns or on 2018 tax returns if 2019 isn't filed yet.

It isn't clear what will happen, for example, if someone was 16 years old on the 2018 return but has since turned 17 and become ineligible for the $500 credit. If the IRS treats that person as 16, some families will have an incentive to wait to file their 2019 tax returns with a 17-year-old until after they get the payments. The payments do not have to be paid back later.

The law also gives people who have been claimed as dependents in the past an incentive to file their own separate tax returns to get $1,200 if they are in fact independent. But the restriction on payments applies to anyone who can be claimed as a dependent, which could let the IRS enforce that restriction by examining how much support a particular person receives from others.

Jeff Cunningham, an internal auditor in Pittsburgh, has three children between ages 18 and 22, all of whom are in school and work part-time. He had hoped they could benefit, but they won't.

"We can live with half or nothing," Mr. Cunningham said. "I think that they should get the 1,200 bucks. They could certainly use it."

Write to Richard Rubin at richard.rubin@wsj.com

 

(END) Dow Jones Newswires

March 28, 2020 08:14 ET (12:14 GMT)

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