CARES Act Economic Impact Payments for Veterans Not Required to File Tax Returns

CARES Act Economic Impact Payments for Veterans Not Required to File Tax Returns

INSIGHTi

CARES Act Economic Impact Payments for
Veterans Not Required to File Tax Returns
Updated August 19, 2020
Overview
The Veterans Benefits Administration (VBA), within the Department of Veterans Affairs (VA), offers two
cash benefit programs for disabled or low-income veterans and their dependents: disability compensation
and pension. The monetary benefits provided by both of these programs are not counted as income for tax
purposes and hence are not subject to the federal income tax. As a result, some VA beneficiaries are not
required to file federal income tax returns because their income for tax purposes is below the minimum
filing threshold. These veterans and their beneficiaries generally qualify for the Economic Impact
Payments (EIPs) provided in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L.
116-136), but their lack of an income tax return has raised complications for the Internal Revenue Service
(IRS) in determining how to distribute these payments. (The IRS refers to the direct payments enacted
under the CARES Act and issued in 2020 as economic impact payments. The statute refers to them as
2020 recovery rebates. Some media reports call them “stimulus payments.”)
Some have questioned how EIPs will impact veterans and survivors receiving disability compensation or
a VA pension. The disability compensation and pension programs differ in terms of eligibility and how the
benefit amounts are determined. Veterans are eligible for disability compensation without consideration of
their income or net worth, and the amount of disability compensation paid is based on a veteran’s
disability rating percentage. The pension is a means-based benefit, meaning there is an income and net
worth limit to qualify, and the amount of a veteran’s and/or their spouse’s income can reduce the amount
of the monthly pension benefit. Many veterans have expressed concern that receipt of the EIP will result
in them either losing their pension benefit or having it reduced.
IRS and VA Agreement for Non-Filers
On April 17, 2020, the IRS and VA announced that low-income veterans and survivors who are not
required to file a tax return will not have to manually provide information to the IRS in order to receive
the EIP. The IRS announced that, while the timing of payments is still a work in progress, “those veterans
and beneficiaries who receive Compensation and Pension benefit payments from VA will receive a $1,200
Economic Impact Payment with no further action needed on their part.”
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Economic Impact Payments for VA Beneficiaries with Qualifying
Children
VA also announced an agreement with the Department of the Treasury, along with additional information
for VA beneficiaries and survivors, explaining that those VA beneficiaries who have filed an income tax
return in either 2018 or 2019 will automatically receive the EIP. However, those VA beneficiaries who did
not file a tax return and have one or more qualifying children, will not automatically receive the
additional payment for their dependents. Such beneficiaries must submit information to the IRS by
visiting the IRS Non-Filer: Enter Payment Info Here tool (e.g., the non-filer portal) to ensure that they
receive the additional $500 for any qualifying children. For the purposes of these payments, a qualifying
child is a child eligible for the child tax credit—generally a dependent child under 17 years old.
On August 14, 2020 the IRS extended the deadline to September 30, 2020, for VA beneficiary non-filers
with one or more qualifying children. VA beneficiaries who did not file a tax return in 2018 or 2019 and
missed the original May 5, 2020, deadline are asked to provide information for qualifying children into
the non-filer portal in order to receive the additional $500 for each qualifying child. For those
beneficiaries who have already submitted information into the non-filer portal, no additional action is
required.
Economic Impact Payments for VA Beneficiaries with Non-Filing
Spouses
The IRS’s April 28 COVID Tax Tip 2020-46 states that VA beneficiaries who are married, and whose
combined income is less than $24,400, must enter their information into the IRS non-filer portal to claim
the full $2,400 payment for a married couple. This step is only necessary for spouses who did not receive
Social Security (SSA), Social Security Disability Insurance (SSDI), Railroad Retirement Board (RRB)
benefits, Supplemental Security Income (SSI), or their own VA benefits and did not have to file a federal
tax return in the past two years.
Economic Impact Payment and Income Limit for VA Pension
Eligibility for a VA pension is, in part, based on the individual’s annual income. As stated in 38 U.S.C.
Section 1503, “all payments of any kind or from any source (including salary, retirement or annuity
payments or similar income, which has been waived, irrespective of whether the waiver was made
pursuant to statute, contract, or otherwise) shall be included” when calculating a veteran’s annual income.
Many veterans or their survivors with limited income and receiving a pension are concerned that these
EIPs will be counted as income and therefore decrease their pension amount.
Section 20010 of the CARES Act, “Clarification of Treatment of Payments for Purposes of Eligibility for
Veterans Pension and Other Veterans Benefits,” addresses the aforementioned concern. In Section 20010,
Congress excluded EIPs from a veteran’s annual income, thereby preventing it from counting toward the
income limit associated with pension eligibility. The section explicitly states that the rebate “shall not be
treated as income or resources for purposes of determining eligibility for pension under chapter 15 of title
38.” Consequently, the EIPs included in the CARES Act also are not to cause a decrease in the amount of
pension the veteran or survivor will receive.

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Author Information

Heather M. Salazar

Analyst in Veterans Policy

Disclaimer
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