What You Need to Know About a Second Stimulus Payment
(Bloomberg) -- The economic relief measure approved by the U.S. Congress includes a second round of direct stimulus payments to households -- an acknowledgment that families need another injection of cash to get through the latest surge in coronavirus cases and the restrictions that followed. The hope is that the payments, along with additional money for small businesses, the unemployed and more nutrition benefits, can help bolster households and combat rising poverty rates. Lawmakers approved $600 checks for most adults and $600 for each of their children. After calling those amounts too small, President Donald Trump relented and signed the bill into law.
1. How much money should I expect to get?
If you earn less than $75,000, or you and your spouse collectively make less than $150,000, you’d get $600 for each of you plus $600 for each dependent child. Those amounts would be reduced by $5 for every $100 you earn above the income threshold, which means those earning more than $87,000 as an individual or $174,000 as a couple get nothing. Also receiving the payments: seniors whose only income is from Social Security, railroad retirees and veterans who rely on disability payments. If the Internal Revenue Service issues more than you are supposed to receive, you do not have to pay the excess amount back. The government is not allowed to reclaim the payments to pay back federal or state debts, and banks are forbidden from garnishing them.
2. How does that compare with the first round of payments?
The $2 trillion stimulus package enacted in April, the Cares Act, had the same income eligibility thresholds but provided $1,200 for adults and $500 for children. As of mid-November, the IRS had issued about 160 million payments totaling approximately $270 billion under that program. It also sent letters to about 9 million individuals who might have been eligible for the money but didn’t receive it, encouraging them to submit their information to see if they qualify. (The latest legislation clarifies that mixed-status immigration households -- those in which one spouse has a Social Security number and one does not -- can still get payments for the spouse and any children with Social Security numbers.)
3. When and how should I receive the money?
Direct-deposit payments should begin reaching bank accounts in the first or second week of January, while checks or pre-loaded debit cards sent by mail could take until late in the month to arrive. The IRS will largely use the address and bank account information collected from taxpayers during the first round of payments to transfer the money. Social Security beneficiaries may not be required to submit any additional paperwork to the IRS, because the agency will likely send them their stimulus payments just as they normally disburse their other monthly benefits.
4. What if my income or family situation has changed in 2020?
The IRS will use the information from your most recent tax return -- in most cases from 2019 or 2018 -- to determine eligibility based on your income, marital status and dependents. However, many people have taken pay cuts or lost wages in 2020 as a result of the pandemic. If you weren’t eligible for a payment based on your most recent tax return on file at the IRS, but would be based on lower income in 2020, you can inform the IRS on the tax return you file in 2021. On that paperwork, you can claim the payment for yourself and any qualifying dependents. The IRS will add the additional amounts to your tax refund.
5. What if I’m still waiting for the first check?
If that first payment hasn’t yet hit your bank account or mailbox, or you got less than you think you’re owed, you can also add that claim on the tax return you file in 2021. The IRS is calling it the Recovery Rebate Credit, and this year’s version of the Form 1040, the individual tax return, has instructions on how to fill that out. You can check the status of your payment at the IRS’s Get My Payment online tool.
6. Do I owe any taxes on stimulus benefits?
No. These direct payments aren’t subject to federal taxes. However, individuals who receive unemployment benefits will be subject to taxes on that money, which will be due when they file their tax returns this spring.
7. Why was there uncertainty about the payments?
After the House and Senate approved the bill containing the $600 payments, Trump said Congress should boost the amount to $2,000 and indicated he might not sign it otherwise. (He also complained about federal spending on foreign aid and international programs included in the bill.) House Democrats, who had pushed for more money in the first place, then proposed a last-minute boost to $2,000, but Trump’s fellow Republicans blocked it. In signing the bill on Dec. 27, Trump demanded a vote in Congress to replace $600 in stimulus payments with $2,000 -- a non-binding request that is unlikely to pass both chambers.
The Reference Shelf
- Tracking the stimulus measures of major economies.
- The IRS has answers to many questions at their at the Economic Impact Payment Information Center.
- Last round, residents in low-wage red states got bigger checks on average.
- Next tax season could be a nightmare for taxpayers trying to reconcile benefit oversights.
- The New York Fed found many people saved, rather than spent, their first stimulus check.
- Bloomberg Opinion’s Karl W. Smith argued against another round of direct payments.
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