Coronavirus Stimulus Checks – How much will you be getting?
Updated: Apr 16, 2020
*** UPDATE ***
Wednesday, April 15, 2020
The IRS released an app today on it's website where you can check the status of your Economic Recovery Payment: https://www.irs.gov/coronavirus/get-my-payment You will need your Social Security Number, Date of Birth and the address from your most recent tax return. Keep in mind that it must match EXACTLY and IS case sensitive. Many of our clients report difficulty signing in, but the IRS says it will likely take a couple days to upload all of the date so if this happens, try again in a day or two.
Contrary to what they promised, you can ADD your bank info but not CHANGE it. If they don't have your bank account info, then they will mail a paper check to your last known address.
Most importantly, remember that not everyone is going to get the money at the same time! The current schedule is for e-filers with a bank account on file to be issued payments first. Social Security recipients and Federal retirees are scheduled to receive theirs at the end of April and those receiving paper checks should expect to see something in early May. So don't feel bad if your neighbor got their payment first, your payment is on it's way.
*** UPDATE ***
Thursday, April 2, 2020
Due to recent backlash, the IRS announced that it will NOT take stimulus checks to satisfy back taxes or student loan debt, but WILL take them for delinquent child support payments.
*** UPDATE ***
Friday, March 27, 2020
As expected, the House approved the bill and the President has said he would sign it. In the final draft it was clarified that those receiving payments based on their 2018 or 2019 tax return would NOT have to repay any excess on their 2020 tax return! There will still be a reconciliation, but it will only be to receive payments for those that didn't get it in the first round. Great news and great planning opportunity!
Thursday, March 26, 2020
Last night the US Senate passed legislation that would provide stimulus payments to help Americans with the financial hardships relating to the Coronavirus. There is still MUCH WE DON’T KNOW about the bill, which is expected to be passed by the House later this week. Currently the bill calls for $1,200 per person to be paid to adults with annual incomes under $75,000 per person, plus another $500 for every child under 17 years old. The credit will be reduced for those earning over that amount and eliminated when income exceeds $99,000 per person (double that for joint filers, half again for heads of household.) The money is likely to arrive in late April or early May via either direct deposit or paper checked mailed to your last known address.
In order to provide immediate relief and hopefully get the funds in circulation sooner, the government will be using your most recent filed tax return as a “best guess” on how much you qualify for. If you’ve already filed your 2019 return, it would be the one use - otherwise, they will go off of 2018. We do not yet know the “cutoff” date; however, Treasury Secretary Steven Mnuchin has hinted that it will likely be sometime the first week of April. Those on Social Security who don’t file taxes will automatically be given the advance payment. There is nothing additional that they need to do to be eligible.
But… the devil is in the details so, here is the part that no one is talking about:
These payments are TAX FREE and do not need to be reported as income. However you will be sent a tax form showing the amount because technically the payment is based on your 2020 income! Since no one knows their 2020 income yet, it is possible that some may have to pay back part of the money when they file their taxes on April 15, 2021 and there WILL be a reconciliation. On the flip side, anyone earning more than the limit, or not claiming their kids in 2018 or 2019, will get the credit later when they file their 2020 taxes. Furthermore, anyone owing back taxes or other government debt will have their payment applied to those obligations first.
The hazard exists if you have changing circumstances. For example, if you claimed a child in 2019, but not in 2020, then you would technically have to repay the $500 credit. Or if you get the credit and your 2020 income ends up exceeding the phaseout, then in theory, you have to give the money back.
There is still a lot we still don’t know about these payments, but they are not unprecedented; The Economic Growth and Tax Reconciliation Relief Act of 2001 (EGTRRA) gave $300 advance payments to help stimulate the economy after the dot com bubble. Seven years later, the Economic Stimulus Act of 2008 provided $600 advance payments after the housing crash. In both cases, there was a reconciliation on the following year’s tax return. In these previous “pre-bate” scenarios, the government forgave excess payments, but it has yet to be seen if that will happen this time around. If it does, there could be planning opportunities to score double credits for older children or children of divorced parents. All it takes is a crystal ball and some shrewd tax planning.
None of this is meant to say that you should hoard the money or invest it all in toilet paper. In fact, getting the money into circulation best serves its intended purpose of stimulating the economy and helping us survive the shutdown. Of course, congress isn’t just relying on the American people to do this as they will be giving ten times this amount to banks to help keep the capital markets afloat. Will it work? We don’t know. How long will all this last? We don’t know. Has the market hit bottom yet? We don’t know. For now, the best answer seems to be to “hurry up and wait!” So, while you are waiting, stay safe and be sure to wash your hands!!!