Congress passed its second stimulus package in two weeks on Friday.
The latest bill has a $2 trillion price tag, aimed at helping Americans and businesses struggling amid the coronavirus pandemic.
About $350 billion is budgeted to go small businesses, $500 billion is committed to major distressed industries, a separate $100 billion was allocated just for the healthcare industry, and the rest will go to covering the expanded unemployment compensation along with direct payments or checks for more than 100 million American adults.
“This is an incredibly difficult time for most Americans,” said Amy Hanauer with the Institute on Taxation and Economic Policy. “I think congress knows that and that was reflective in this attempt to get quick money into most people’s pockets.”
Hanauer’s team has researched the most common questions around the direct payments, like who exactly qualifies and how quickly can someone expect a check?
“I am absolutely certain it will take a few weeks for many households,” said Hanauer. “We know that Americans need this money right now, but it is going to take a while to get sorted.”
Hanauer believes it will take at least two weeks, likely three weeks, before checks start arriving. Those checks will only automatically go to people who filed taxes in 2018 or 2019, and only people who use a social security number when they filed. Those who used an ITIN number to file taxes, typically immigrants, do not qualify.
Per the IRS’s latest guidance, those with a Social Security number who typically do not file tax returns will need to file a simple tax return to receive an economic impact payment. Low income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file tax returns will not owe tax.
In addition, your income is the last determinant on whether you will get a check and how much that check will be.
“If your earnings in the year 2020 are under $99,000, you as an individual will get some sort of check from the federal government,” explained Hanauer. “If you have earned less than $75,000, you should get $1,200 for you and up to $500 for each of your children.”
The maximum for a couple with two children is $3,400, and if they file a joint return, the threshold is $150,000. Technically your qualification for the money is based off your 2020 income, but since no one has or can file a return with that income yet, the IRS is using either your 2018 or 2019 tax return. They will use the latest year on file.
Many have wondered what will happen if you have a significant change in income in 2020. If you suddenly make over the $75,000, and you were below it in 2018 or 2019, the government will not force you to pay the money back. However, if your income was above the threshold in 2018 or 2019, and you don’t receive a check, but in 2020 your income ends up decreasing below the $75,000 threshold, then you will get a $1,200 tax credit on your 2020 return.
Click here to read a FAQ from the IRS.