We are approaching the three month anniversary of the economic stimulus having been made into law by Congress. This aid package was intended to act as a life preserver for struggling families and businesses during the coronavirus pandemic. If you are struggling through a divorce case right now you may have questions about how the legislation will effect you and your family during these difficult time. In our blog post from the Law Office of Bryan Fagan, we will go through some of the important points that touch on these topics.
The basis for the bill was to provide non-taxable relief to families that earned under a certain dollar threshold. Most Americans were eligible for payments of $1,200 even if they never paid income taxes. Checks or other forms of payment went out in April. The amount that you were paid could have been impacted in one direction or another as determined by your income. Married persons would have been paid $2,400 by the government. You were also eligible to receive a payment of $500 for each child in your family. As you can see, these were substantial payments that the government was committing itself to paying.
What happens if you owe child support?
A question that family law attorneys with our office often receive in regard to tax refunds is whether or not the government can intercept that money and apply it to any child support or tax arrearages. Basically, if you owe money on back taxes or back child support you would want to know if your tax refund would actually end up in your pocket or if the government would step in and apply it to the money you owe in taxes or child support.
Similar questions are being asked and have been asked in regard to these stimulus payments. If you are the party who is obligated to pay child support and you have an arrearage you may have questions about whether or not the stimulus payments will ever make their way into your wallet. Suppose that you have lost your job due to the coronavirus shutdowns. Maybe you lost your job in 2019 and are working to get out of a financial hole. That stimulus money could really help you out right now.
The Office of the Attorney General (OAG) of Texas by law has to tell the federal government if you owe child support- whether that amount is $100,000 or $1. With that said, yes, the OAG can intercede and take part or all of your stimulus check in order to pay towards an arrearage of child support. The money will be sent directly to your child’s other parent to whom your child support is paid.
Could you end up receiving money on behalf of your ex-spouse?
Sometimes these government payments don’t move at the speed of your divorce. Meaning, you may have been working on getting a divorce at the beginning of this pandemic and have actually had the divorce approved since then. It is unlikely that the federal government would have taken his into account while it works on getting stimulus payment organized and disbursed. The question is: what should you do if you receive a payment that should go to your ex-spouse?
I think it would be a wise decision for you to go ahead and send that money to your ex-spouse as quickly as possible. It is never a good idea to hold on to someone else’s money. It is an especially bad idea to try to hang on to your ex-spouse’s money. Contact him or her as soon as you are aware of your being in possession of their money. You all can work on getting the money to your ex-spouse together.
What about the money that is supposed to go towards the benefit of your kids? Who gets that?
As I mentioned earlier in today’s blog post, payments of $500 are included in this legislation that is intended to benefit families with children. If you have a large family then this payment would stand to be a pretty significant sum of money. What would happen to that money if you and your family are now in the middle of a divorce? Which parent should get that money?
This is a question without a clear answer. If you are still going through the divorce then by definition you are still married. With that said, I would work out an agreement with your spouse or through your attorneys on how to divide up the money. Splitting the money down the middle, allocating all of it to the parent who pays child support, or allocating all of it to the parent who receives child support and then crediting the other parent for the amount received would all seem to be viable options.
The same thing goes for receiving a check into your bank account during a divorce even if you don’t have kids. The government is going to refer to your most recently filed tax return as to how to send out your payment. If your bank account was on that tax return then it is likely that your stimulus money would be sent to that account, as well. This could present a logistical issue if you and your soon to be ex-spouse no longer share a bank account.
Again, work with your attorneys to figure out a way to divide the money up between yourselves. There is no one size fits all approach that can be taken when it comes to this subject. Do not assume that because money winds up in your bank account that it is all yours to keep, however. If something seems too good to be true it probably is.
If you are divorcing does the stimulus payment count as community property?
In a Texas divorce, all property at issue in your case is presumed to be community property. This means that it would be eligible for division in your divorce. Unless you received the property by gift, inheritance or that you owned it separate from your spouse prior to your marriage it would count as community property. With that said, it would seem that the stimulus payments would count as community property for the purposes of your divorce.
Just because you are working on getting a divorce right now does not mean that the money wouldn’t still count as community property. You probably filed a joint tax return with your spouse in 2019 and are working on doing so this year, as well (taxes are due July 15th). Given how quickly the government is working to get the payments out it is likely that you have already received your payment. If not, here are some tips on how to proceed given this tricky and unprecedented situation.
What does your child custody situation mean for your stimulus check payment?
Your divorce only adds to the uncertainty surrounding the coronavirus pandemic. Your health and financial well being are concerns that legitimate for you to have right now. On top of that your children are probably asking you questions about all these topics that you do not have ready answers for. While these stimulus payments may have looked to be something that could have provided a great deal of benefit, the uncertainty about who gets what may have taken the luster off the assistance.
If you filed as head of household on your most recent tax return it is likely that you will have received these payments directly into your bank account. You are responsible for the payments being applied however you desire them to be. Depending on what your current child custody situation is the payment may need to remain with you or be sent to your child’s other parent.
Your child support situation as a whole will remain the same despite the coronavirus pandemic. You are required to pay child support as ordered in your court orders and the government would still be forced to take any stimulus money paid to you if you owe child support. Do not be surprised if your spouse applies the money received from the stimulus directly to any arrearage if she receives the money before you.
In the event that you are unclear on how much money you are eligible to receive or if you owe child support right now, it would be recommended that you speak to an experienced family law attorney before making any decisions one way or another.
What to do about conflict regarding the stimulus check payments?
These situations will almost inevitably cause conflicts between spouses or ex-spouses if you do not tread with caution and forethought. Keep in mind, however, that the stimulus payments are basically money that you would have received in 2021 in the form of an advance on your tax refund. This isn’t money that the government is just giving away for free with no impact on your bottom line.
With this in mind, it would make sense for whatever parent will be able to claim the children on their 2020 taxes to be able to take advantage of this advance of money. Just because you received the money into your bank account does not mean that the IRS has done a thorough and exhaustive job of reviewing your family situation to determine which person should rightfully receive the money. If you still have not filed your 2019 taxes then the 2018 tax return is what the government would be going off of.
What happens if you receive a stimulus check with two names on it?
This is a possibility that you may have to encounter, as well. What if you were to receive a check that bears your name and that of your ex-husband, as well. The law that created the system of check payments says that when it issues a stimulus check payment in connection with a married filing jointly tax return that the payment should be treated as being split evenly between the two persons named on the check.
Now, this is what the law states and what would occur in a perfect world. Unfortunately, we all know that reality doesn’t always match up with what would occur in a perfect world. What I would recommend is discussing this issue with your spouse before you receive the check. See if you can devise a strategy to deal with issue before it escalates into a fight between the two of you. Family law attorneys can be a great resource here because we are equipped to come up with solutions to problems like these based on our experiences.
What I would not recommend doing is allowing these disagreements to escalate to the point of needing a judge to help decide them. Keep in mind that family courts are virtually closed right now except for extraordinary matters concerning family violence. In Harris County there are three family courts that are physically open. The rest of the courts will share space there and will hear matters based on a number of different factors. When immediate health and safety of the parties is not at issue then it is likely that your hearing would be pushed to the back of the list.
Ultimately, I could see this issue as being one that a judge wouldn’t even hold a hearing on. Rather, you and your spouse could submit a brief of your arguments to the judge and you would await a decision in writing rather than through a hearing.
Questions about family law matters and stimulus checks? Contact the Law Office of Bryan Fagan
If you have any questions about the material presented in today’s blog post please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations in person, over the phone and via video conference six days a week. These consultations offer you a great opportunity to learn more about your circumstances and the services that our office can provide to you.