How Divorce Complicates the COVID-19 Stimulus Checks
As the Covid-19 Pandemic lingers on, the United States Federal Government continues in attempts to provide assistance. Most notably, the United States Treasury has already issued two rounds of stimulus checks with an imminent third round pending. While these stimulus checks can come as a relief to some and not enough for others, they have raised difficult questions for courts who are handling family law matters. A common issue throughout current family law cases is what to do when a stimulus check is distributed to an individual on behalf of multiple individuals no longer living full-time in the family household.
The Divorce Dilemma
In divorce cases, couples who filed joint federal income taxes in 2019 are now facing a dilemma after being separated in 2020. If a couple filed jointly in 2019, only one stimulus check will be issued for both parties. Of course, this joint stimulus check will be a greater amount than those checks issued to individuals. Couples who filed jointly in 2019, but then separated, are dealing with only one of the individuals receiving a check on behalf of both. This issue not only creates tension in the divorce process, but can also serve as a major problem for the spouse not receiving the check if that spouse has been seriously impacted financially by the pandemic. Courts have been hesitant to engage in ordering spouses to turn over stimulus check money, so these issues have had to be creatively solved by the representing attorneys.
Stimulus checks are also being distributed to families in accordance with how many dependents they claimed on their previously filed taxes. For parents with a custody arrangement, there have been questions as to how fairly these payments are being issued. The CARES Act of 2020 indicated that all stimulus checks should be issued in accordance with the guidelines set forth in the tax code. The tax code provides that the parent with whom the child spends the majority of the year should be entitled to any tax benefit derived from claiming that child as a dependent. If the parents exercise 50/50 custody of the child, then the parent with the highest adjusted gross income is entitled to the benefit. Again, Courts have been inconsistent with how they have chosen to apply the tax code to stimulus checks when parents in a custody matter disagree as to its distribution.
Because there has been no clear guidance on how stimulus checks should be handled in family law matters, these issues will be handled on a case by case basis. Some Courts may allow for creative solutions while other Courts may approach the question at arm’s length and leave it up to the parties to negotiate. Either way, it is important to consult with an attorney as to your options moving if you are involved in a family law matter and wish to contest the distribution of a stimulus check.