On March 27, 2020 the Congress passed H.R. 748, the Coronavirus Aid, Relief and Economic Security “CARES” Act. This Act is intended to provide emergency economic relief to individuals, families and businesses who are impacted by the 2020 COVID-19 Pandemic. How does the CARES Act impact your Connecticut Divorce?
How are Economic Impact Payments Treated in my Connecticut Divorce?
The CARES Act provides for Economic Impact Payments to be made to many American households based on Adjusted Gross Income (“AGI”) as reported on 2018 and 2019 Federal income tax returns. Eligibility is based on thresholds, for example, if you filed individually and had AGI less than $99,000, filed individually as head of household with AGI of less than $136,500, or filed jointly with AGI less than $198,000, you may be entitled to payments of up to $1,200 per adult and $500 per child.
If you are going through a divorce in Connecticut and you, your spouse and/or your children are entitled to economic impact payments, the payments constitute a marital asset for purposes of dividing property, the same way that a tax refund would be.
If I am already divorced, who will receive the Economic Impact Payments on behalf of my children?
Whether or not your child is entitled to an impact payment depends on the financial information of the parent who claimed the child on a 2019 tax return. If neither parent filed a 2019 tax return, the payment will be based upon the parent who claimed the child in 2018. Payments are automatically made into the account or mailed to the address designated by the tax filer on his or her return.
How do I know if my Spouse Received Funds from the Paycheck Protection Program?
The paycheck protection program was established under the CARES Act and is intended to provide small businesses with up to eight weeks of payroll and other costs (such as rent, mortgage interest and utilities). If you are going through a divorce in Connecticut and your spouse owns a business, it probably worthwhile to formally request any and all documents and applications submitted to or received from the paycheck protection program (or any other Federal, State or Municipal relief, for that matter). This will not only inform you as to whether or not your spouse has received funds, but it will also provide you with documentation of the payroll and other financial information of the business in the months and years leading up to the divorce.
Will my alimony reconciliation be postponed due to the tax deadline extensions?
The IRS, in conjunction with the CARES Act, has extended the deadline to file and pay federal income taxes from April 15, 2020 to July 15, 2020. If your Separation Agreement provides for a reconciliation of alimony upon the filing of your ex-spouse’s tax return, and he or she is taking advantage of the extension, it will likely impact your ability to conduct a reconciliation. While you are waiting for the 2019 tax return to be filed, there may be other documents that you can request from your ex to at least start the reconciliation process, such as W-2s, year-end paystubs, 1099s and other supporting documents.
Broder Orland Murray & DeMattie LLC recommends that you seek advice from an experienced divorce attorney, as well as your tax professional and financial advisor as to how the CARES Act might affect you if you are divorced, divorcing or separated in Connecticut.