Everything You Need to Know About the Stimulus Payments

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It’s official. The largest emergency aid relief in U.S. history was just signed into law to address the economic impact of the Coronavirus. Named the CARES Act, this monumental $2 trillion stimulus package is intended to provide relief to individuals, businesses, and industries who have taken a financial hit over the last several weeks.

Of course, the star of the stimulus package is the $250 billion designated for direct payments to Americans.

Yeah, you read that right.  You are probably getting a check.

To help you better understand the stimulus payments and determine if you qualify, we’re here to answer the most common questions.

Who qualifies for the stimulus money and how much is the payment?

The short answer – most everyone will qualify for some amount of money. You must have a Social Security number and not be a dependent of someone else. Here are the specifics:

  • Individuals (aka Single filing status) who have an adjusted gross income (AGI) of $75,000 or less are eligible to receive the full payment amount, which is $1,200. That payment reduces by $5 for every $100 in income above $75,000. Reduced payments will go out to individuals who earn up to $99,000 a year. If you earn more than $99,000, you will not receive a payment.
  • Married couples with an AGI of $150,000 or less are eligible to receive a full payment amount of $2,400. That payment also reduces by $5 for every $100 over the $150,000 mark for couples who earn up to $198,000. Those who have an AGI that’s more than $198,000 are not eligible to receive a payment.
  • Head of Household filers who have an AGI of up to $112,500 are eligible to receive a $1,200 payment. Reduced payments will be sent to Head of Household filers with an AGI of up to $136,500. Those who earn more than $136,500 are not eligible to receive a payment.

Check line 8b on your 2019 1040 federal tax return to find your AGI. If you haven’t filed your 2019 return yet and need to refer to your 2018 AGI, check line 7 on Form 1040.

But what if I have children?

Good news! If you have children under the age of 17, you may qualify to receive an extra $500 for each one.

Unfortunately, that means if your child is over the age of 17 you will not qualify for extra money.

My child is in college, do I get anything extra?

Unfortunately, no. To qualify for the extra $500 your child must be age 17 or younger. If you still plan to claim that child as a dependent on your 2019 return, there is no additional money to receive.

What about people who are on Social Security or who don’t earn an income?

If you are on Social Security or otherwise don’t earn an income, you still qualify for the relief payments. That is as long as your total income does not exceed the income thresholds mentioned above.

How do I get the payment? Do I need to do anything?

You don’t need to worry about doing anything if you’ve already filed your 2019 tax return. That’s because the federal government already has the most up-to-date information needed to accurately assess how much your payment should be and send it to you. You’ll receive it automatically.

If you haven’t completed your 2019 return, we recommend filing as soon as you can so you receive the most accurate payment. Filing now also helps to ensure your bank account and home address information is up to date so there is no question about where the money should be sent.

If you don’t file your return by the time the payments go out, your 2018 AGI will be used to determine how much you are due.

For retirees who are not required to file a return and receive Social Security benefits, the information needed to accurately assess your payment and send it to you is collected from what’s on file with the Social Security Administration (SSA). As long as you received a SSA-1099 form (the Social Security benefit statement), the federal government will send your payment the same way they send your Social Security payment. Disabled individuals are also eligible for the payment.

When will I receive my money?

Treasury Secretary Steven Mnuchin initially stated his goal was to get the first payments issued the week of April 6. Many experts, however, have stated that may be too ambitious of a goal. They speculate it will likely be later in April.

In 2008, the stimulus payments went out in batches. It took roughly eight weeks for everyone to receive their checks.

We will update this section once a more definitive plan is set into motion.

How will I receive my money?

To promote social distancing and get the money in the hands of Americans as fast as possible, the federal government prefers to send the payments via direct deposit. Going the direct deposit route allows you to receive your payment much quicker.

If you don’t have a direct deposit option, however, other solutions are available. Paper checks will be sent if necessary.

Is this money taxable?

No, the payments are not taxable. But there is a small catch.

Technically, your 2020 income is what qualifies you for the stimulus payment. Since it’s impossible to know your total 2020 income at this point in the year, the government is using prior year tax returns to determine who qualifies for a payment.

If your 2020 income ends up being significantly more than it was in 2019 or 2018, you may have to pay some of it back. Fortunately, this caveat is expected to affect very few people. And that money won’t need to be paid back until April 15, 2021.

What if I owe money to the IRS for prior years?

Lucky for you, you don’t have to worry about that. Any IRS liabilities you currently have, including any back taxes, won’t be taken out of this money. You’ll still receive your full payment.

Calculate your stimulus payment. (We’ll walk you through it.)

The formula:

  1. Start by determining your maximum credit
    1. $1,200 for each taxpayer (Single/HOH = $1,200, Joint = $2,400)
    2. Add $500 for each qualifying child
  2. Determine if the credit will be phased out
    1. Single – Phase out starts at $75,000
    2. Joint – Phase out starts at $150,000
    3. HOH – Phase out starts at $112,500
    4. Is your AGI over this amount?
    5. No – your stimulus payment is the credit calculated in Step 1. Stop here.
    6. Yes – go to Step 3
  3. Subtract the amount in Step 2 from your AGI
  4. Multiply Step 3 by 5%
  5. Subtract Step 5 from Step 1. This is your stimulus payment.

Example: Single, no kids, AGI $85,000

  1. Start by determining your maximum credit
    1. $1,200 for each taxpayer (Single/HOH = $1,200, Joint = $2,400)
    2. Add $500 for each qualifying child
  2. Determine if the credit will be phased out
    1. Single – Phase out starts at $75,000
    2. Joint – Phase out starts at $150,000
    3. HOH – Phase out starts at $112,500
    4. Is your AGI over this amount?
    5. Yes – go to Step 3
    6. No – your stimulus payment is the credit calculated in Step 1
  3. Subtract the amount in Step 2 from your AGI (10,000)
  4. Multiply Step 3 by 5% (500)
  5. Subtract Step 5 from Step 1. This is your stimulus payment. (1,200 – 500 = $700)

Example: Married Filing Jointly, 2 kids, AGI $175,000

  1. Start by determining your maximum credit
  2. $1,200 for each taxpayer (Single/HOH = $1,200, Joint = $2,400)
  3. Add $500 for each qualifying child (2,400 + 1,000 = $3,400)
  4. Determine if the credit will be phased out
    1. Single – Phase out starts at $75,000
    2. Joint – Phase out starts at $150,000
    3. HOH – Phase out starts at $112,500
    4. Is your AGI over this amount?
    5. Yes – go to Step 3
    6. No – your stimulus payment is the credit calculated in Step 1
  5. Subtract the amount in Step 2 from your AGI (25,000)
  6. Multiply Step 3 by 5% (1,250)
  7. Subtract Step 5 from Step 1. This is your stimulus payment. (3,400 – 1,250 = $2,150)

Example: Married Filing Jointly, 0 kids, AGI $175,000

  1. Start by determining your maximum credit
  2. $1,200 for each taxpayer (Single/HOH = $1,200, Joint = $2,400)
  3. Add $500 for each qualifying child
  4. Determine if the credit will be phased out
    1. Single – Phase out starts at $75,000
    2. Joint – Phase out starts at $150,000
    3. HOH – Phase out starts at $112,500
    4. Is your AGI over this amount?
    5. Yes – go to Step 3
    6. No – your stimulus payment is the credit calculated in Step 1
  5. Subtract the amount in Step 2 from your AGI (25,000)
  6. Multiply Step 3 by 5% (1,250)
  7. Subtract Step 5 from Step 1. This is your stimulus payment. (2,400 – 1,250 = $1,150)

Example: Head of Household, 1 kid, AGI $120,000

  1. Start by determining your maximum credit
  2. $1,200 for each taxpayer (Single/HOH = $1,200, Joint = $2,400)
  3. Add $500 for each qualifying child (1,200 + 500 = $1,700)
  4. Determine if the credit will be phased out
    1. Single – Phase out starts at $75,000
    2. Joint – Phase out starts at $150,000
    3. HOH – Phase out starts at $112,500
    4. Is your AGI over this amount?
    5. Yes – go to Step 3
    6. No – your stimulus payment is the credit calculated in Step 1
  5. Subtract the amount in Step 2 from your AGI (7,500)
  6. Multiply Step 3 by 5% (375)
  7. Subtract Step 5 from Step 1. This is your stimulus payment. (1,700 – 375 = $1,325)

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