This article is part of a new series on the coronavirus stimulus bill. Check back soon for more!
On Friday afternoon, President Trump signed into law a $2 trillion stimulus bill to provide economic relief to businesses and individuals affected by the coronavirus pandemic. After several weeks of uncertainty, the final package does include a direct payment provision to get cash into the hands of struggling Americans. Here’s how these payments will work.
Though some members of Congress support sending monthly checks to all Americans, the measure included in the final bill includes a one-time payment limited by adjusted gross income. You must be a U.S. citizen or resident with a work-eligible Social Security Number to receive a payment.
Individuals who earn less than $75,000 per year will be eligible for the full $1,200 payment. If you earn between $75,000 and $99,000, you’ll receive a reduced payment calculated by subtracting $5 from $1,200 for every $100 in income above $75,000. Individuals earning over $99,000 won’t receive any money.
These thresholds increase to $112,500 (phased out at $146,500) for heads of household, and $150,000 (phased out at $198,000) for married couples who file jointly. For each child 17 or under, you’ll receive an additional $500.
You won’t have to pay taxes on your direct payment.
Your payment will be based on your 2019 federal income tax return, if you’ve already filed. Otherwise, it will be based on your 2018 return. (The 2019 tax filing deadline was already extended to July 15).
If your income was above the qualifying threshold in 2019, and you’ve since lost your job, you’ll still be eligible for a rebate. Because the payment is actually an advance on a tax credit you can claim on your 2020 tax return, your credit will either be refunded or reduce your liability when you file your 2020 return next year. However, if you receive a payment now and your 2020 income is higher than the threshold, you won’t have to pay the government back for the check.
If someone claimed you as a dependent on their tax returns, you won’t be receiving a payment. Unfortunately, this disqualifies most full-time college students under the age of 24 whose parents provide more than half of their support. Non-resident aliens won’t receive money, either.
Individuals who owe past due child support that has been reported to the Treasury Department may not receive a payment for which they’d otherwise be eligible.
Your relief payment will not be reduced because of past due tax debts or student loan payments.
If you’ve already set up direct deposit with the IRS, your relief payment will be transferred directly to the bank account on file, possibly within three weeks. Otherwise, you’ll have to wait for your check to arrive in the mail. This will likely take longer.
If you’ve filed federal income taxes in 2018 or 2019, no additional action on your part is required.
You can file a 2019 tax return online for free, if you’ve not already done so. Even individuals reporting no income should receive a payment, as long as they meet the other eligibility requirements.
Low-income seniors and disabled people who don’t file tax returns should receive their payment based on their Social Security Benefit Statement, Form SSA-1099.
Last week, the country saw 3.3 million workers file unemployment claims, a number that dwarfs the previous record of 695,000. If the coronavirus pandemic keeps businesses shuttered for months, it’s unclear how much help most individuals will gain from a single $1,200 payment. Still, the administration of direct cash payments represents an important development in providing Americans the relief needed to weather this crisis. President Trump has said that if needed, he’ll ask Congress to approve additional direct payments in the summer.
It’s unfortunate that most college students don’t qualify for payments. For this reason, it’s more important than ever to carefully manage your personal finances. Debtly can help!