How Do Economic Income Payments Work for Social Security Beneficiaries?

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Disclaimer: With Medicaid, VA, and insurance regulations frequently changing, past blog posts may not be presently accurate or relevant. Please contact our office for information on current planning strategies, tips, and how-to's.

As a part of the recent Coronavirus Aid, Relief, and Economic Security (CARES) Act, each American citizen is set to receive an Economic Income Payment. Eligible U.S. taxpayers will automatically receive their payments if they filed federal income tax for 2018 or 2019. But what about individuals who receive Social Security benefits?

Fortunately, Social Security beneficiaries who do not typically file tax returns will NOT need to file an abbreviated tax return in order to receive an Economic Income Payment. Instead, the IRS will use the information provided on the Form SSA-1099 to deliver the $1,200 payments to Social Security beneficiaries who did not file federal tax returns for the last two years.

That said, exceptions exist, especially for those with dependents under age 17 who qualify for an additional $500 payment per child. These exceptions include:

  • Individuals who receive Social Security retirement, survivors, or disability insurance benefits who did not file a tax return in 2018 or 2019 and have qualifying dependents under age 17
  • SSI recipients who have qualifying children under age 17
  • New beneficiaries since January 1, 2020 who did not file a tax return for 2018 or 2019

For these cases, individuals must visit the Non-Filers page on the IRS website to enter their payment information.

How do Economic Income Payments affect those who are currently eligible for Medicaid? Since Medicaid offices are not counting receipt of the stimulus checks as income, applicants will not be over-income in the month they receive the check. See CMS FAQ (Item 54). Specifically, these “Recovery Rebates” are not taxable income under 26 U.S.C. Sec. 6409 (prohibiting the counting of tax rebates or advance payments as income and, for 12 months following receipt, as resources). This is also confirmed by the Social Security Administration, and the rules for Medicaid eligibility cannot be more restrictive than Social Security. Accordingly, the stimulus checks should not pose any issues for those who are currently eligible.

How do they affect individuals who are currently in the planning phase and seeking Medicaid eligibility? The citations above should also hold true for those who have not yet obtained Medicaid eligibility. Specifically, section 6409 explains that “any refund…made to any individual under this title [shall not be considered as income, or as resources for 12 months from receipt]… for purposes of determining the eligibility of such individual.” The phrase “for purposes of determining eligibility” without any additional qualification would indicate that the provision would apply for evaluation of continued eligibility and for new applications.

For additional details and eligibility requirements, visit the Coronavirus Tax Relief and Economic Impact Payments page on the IRS website.

Read the full article from the Social Security Administration.