Allocating Stimulus Checks in the Divorce Context

By Megan Stanley, Partner, Integrative Family Law PLLC

Disclaimer: This information is not intended to be legal and/or tax advice for any specific case and it is provided for general information purposes only.

On April 13, 2020, the federal government began distributing stimulus checks to families with qualifying incomes.  The IRS based the amount of the stimulus checks on reported income for the most recent tax return.  Considering the extensions granted for the 2019 tax filing deadlines, for some families this could mean 2018 tax returns and for others 2019 tax returns.

The payments will likely be automatically deposited into the bank account associated with the last tax return or sent by mail to the address associated with the return.  For couples who were married at the time they filed their last tax return but have since divorced or are separated, this may create a situation where the stimulus money is being deposited into an account which is now owned or controlled solely by one party.

Parties should consider that the income reported on the return was earned by the marital community.  In community property states, including Washington State, income earned by either party during the marriage is considered community property.  If the income belonged to the community and the parties have since separated or divorced, parties should consider dividing the stimulus funds so each party can receive a share of the funds.

Securing a portion of the stimulus funds that were based on income earned during the marriage may require cooperation and communication with your former spouse.  If conflicts arise, it may be wise to seek the assistance of counsel.

If your divorce case is still in the court system or you were legally married as of Dec. 31, 2019, the IRS requires you to file your federal tax return as a married couple with the option of filing jointly or separately. If you are going through a divorce and you have not yet filed your return, it may make sense to file separately.  You and your spouse may then receive two separate stimulus checks.   Consult your tax professional for guidance.

In addition to stimulus funds based on income, families with children typically receive $500 per child for children under the age of 17.  There may be questions regarding which parent should retain the stimulus payment for the child or children if the last tax return was filed jointly. Should the payment be split, or should the custodial parent receive the stimulus funds? This is a novel issue with no clear answer.  Parents could consider the allocation of the child tax exemption in child support orders. Parents can also decide on their own to allocate the funds to one parent or to divide the funds.

Consideration should be given to the financial circumstances of both parents and how the funds can best be used to support the children during the COVID-19 crisis.  Stimulus funds were intended to support families struggling during this difficult economic time.  If disputes arise, parents may need to work with counsel to determine a fair approach.

If you have questions regarding stimulus checks with regards to your dissolution, please contact one of our family law attorneys.