The second round of direct checks authorized in the nearly $900 billion coronavirus relief package are not a copy of the first checks, starting with the $600 payout size cut in half.
But many rules about stimulus checks 2.0 remain the same — meaning some theories about government money that weren’t true in the spring are just as false now.
Those are canards like an alleged obligation to (wrongly) refund the money or the ability of a random cold caller to get your money faster (that’s a scam).
Federal regulators are already trying to avoid potential confusion. Congress passed the emergency bill on Monday, and President Donald Trump expressed doubts about the relatively modest sign of the stimulus measures compared to the first emergency measures announced in March, among other concerns. Last Sunday, he signed the massive pandemic aid bill, averting a government shutdown in the process.
But the Federal Trade Commission reminded on Tuesday that no one will ever call you asking for money to get faster access to the money.
At the same time, the new set of stimulus checks has some new rules for certain scenarios, such as for those with alimony arrears or married to a non-citizen.
Treasury Secretary Steven Mnuchin said Monday that these economic-impact payments could arrive in bank accounts next week.
Before that money hits your bank account, here’s a refresher on old myths to ignore and new ones to avoid.
‘I have to pay this money back‘
“No you don’t. It’s yours to keep,” said Lauren Saunders, associate director of the National Consumer Law Center.
Some bill summaries note that the stimulus is an advance on your 2020 tax credit, but consumers should not view the credit as an advance to be repaid later.
The income thresholds are the same and provide full payment — $600 per adult and $600 per qualifying child — to individuals with an adjusted gross income of less than $75,000 per year and married couples who jointly have an adjusted gross income of less than than $150,000 per year.
The Internal Revenue Service will look at a household’s income in 2019 to determine whether they qualify. (These were the ones people had to submit by July 15 or October 15 if they applied for an extension.)
Payments are also declining at the same rate for those earning above the income threshold ($5 for every $100 over the threshold.).
But this time, benefits gradually grind to a halt at lower income levels.
That’s because there’s less cash per check, so it’ll run out sooner using the same phase-out formula as before. Now the payments are ending in full for single filers making $87,000 a year and more, and it’s ending for married couples worth $174,000 a year and more.
With the $1,200 checks, payments ended at an annual income of $99,000 for individuals and $198,000 for couples.
‘The stimulus check is taxable income‘
Again, no. The incentive check that you receive does not count towards your income tax. That’s one point the House Ways and Means Committee noted in Monday’s review of the new round of scrutiny.
And because incentive checks don’t count as taxable income, they don’t affect, offset, or factor in the amount of your refund.
While stimulus checks don’t count as taxable income, the money for unemployment benefits does count when the IRS matches an individual’s income tax return, according to April Walker, chief manager for tax practices and ethics at the American Institute of Certified Public Accountants.
The new aid package authorized $300 weekly unemployment insurance to take effect in mid-March.
One danger is an annoying tax bill waiting for people who didn’t know how to withhold money for income taxes when receiving their weekly payouts, experts say.
Thirty-seven percent of people were unaware that unemployment benefits were taxable income, according to a June survey by Jackson Hewitt, the national tax preparation chain. Just over half of the 1,000 people surveyed (51%) didn’t know they had to ask for deductions from their benefits.
‘My stimulus check will eat my IRS refund’
New. The stimulus check you receive now will not affect your refund later. Nor will it be taken away with a default on student loans, back taxes or other debts, Saunders said.
When the first stimulus checks came into the accounts, the money was supposed to help families feed themselves, but with an initial lack of protection, the money “actually fueled some debt collectors.” This time, collection agencies can’t seize the payment,” Saunders said.
While there were all sorts of financial obligations and arrears that shouldn’t be plunged into the incentive plans, one exception to past debts was on child support due.
In the second round of stimulus checks, those with child support will not get those debts off the top. “Some of those debts were very old,” and the children that needed to be supported were adults and moving on with their lives, Saunders said.
‘I can speed up the payment process’‘
For many people who are in pain and feel like they are trying to survive financially every day, the money can’t come soon enough. But don’t let that deceive you.
Government officials will never call, text or offer you on social media to give you your incentive money in exchange for upfront cash, the Federal Trade Commission reminded consumers on Tuesday. Anyone who makes such an offer is trying to rip you off, the agency said.
“There is no such thing as getting your money sooner or faster. Anyone who says they can reach you now (or soon) is lying and is a scammer,” the consumer protection agency added.
Overall, government impostors have cost consumers more than $5 million, according to an FTC database that tracks consumer complaints they received during the pandemic.
After the bill is signed, the IRS will begin issuing payments early next week and in January 2021, the House Ways and Means Committee said. “When available, electronic direct deposit will be used instead of sending a paper check,” the committee added.
‘It’s now or never to get the incentive’
Not necessary. Keep in mind that the direct payments are technically an advance on the taxes you will file early next year on your 2020 earnings. If a person’s earnings exceeded the income limits in 2019, but they had a difficult 2020, they could get the incentive payment after filing their taxes. If someone has still earned above the income limits, they still won’t get a check
The IRS’s 1040 for the upcoming tax season will include a rule where taxpayers can claim their chargeback discount. The IRS released the revamped 1040 earlier this month.
People who failed to file taxes — probably because they weren’t making enough money — had until Nov. 21 to submit their bank account information through the Non-Filer Portal and receive their incentive check this year. Saunders noted that people who don’t meet this deadline can still get their first incentive check and the upcoming $600 check by filing an income tax return next year.
There is one drawback to getting this year’s direct checks during next year’s tax season. The amounts will be lumped together in a taxpayer’s general income tax refund, the Ways and Means Committee noted. Therefore, the money will be “subject to the garnishment and settlement rules that generally apply to federal income tax returns.”
The IRS will reduce refunds on liabilities such as child support arrears, debts to other federal government agencies, and state income taxes.
‘My immigration status will disrupt the stimulus’
Not necessary. Like the first round of stimulus checks, the second round goes to people with Social Security numbers. In the specific context of these direct checks, they are American citizens and green card holders, according to Allen Orr, president-elect of the American Immigration Lawyers Association.
But under the CARES Act, citizens and green card holders who were married to undocumented spouses were not given the $1,200 incentive check, nor were they given the $500 each for their civilian children. The decision sparked lawsuits from people who said they were getting much-needed money just because of who they loved and got married.
The new bill addresses the issue of “mixed status” marriages. Now, the Social Security card holder gets the $600 immediate payment, as do all children with a Social Security number, Orr said.
The bill also contains a retroactive effect. That means the Social Security card holder who previously missed payment of $1,200 and eligible children who missed $500 are eligible, Orr said.
The provision was an attempt to rectify a past mistake, Orr said.
Last week, Senator Marco Rubio, a Republican from Florida, made the same point. “Correcting the provision that barred some eligible U.S. citizens from receiving a federal stimulus check under the CARES Act was a mistake that needed to be corrected,” he said in a statement. “No American should have been blocked from receiving federal aid during a global pandemic because of who they married.”