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(From the Financial Literacy Blog) – The Internal Revenue Service (IRS) is sending Americans up to $600 per person to help ease financial struggles amid the pandemic. However, the amount you actually receive can vary depending on your income and whether or not you have dependents. These factors, along with circulating rumors about the stimulus package, have caused some confusion. Here are the answers to some of the common stimulus package questions:
Who Qualifies for a Payment?
Individuals and couples with Social Security numbers are eligible for stimulus payments. In order to be eligible for the full $600 payment, an individual’s adjusted gross income needs to be $75,000 or less. At individual income levels higher than $75,000, the stimulus payment decreases in increments until an individual income reaches $87,000, where it is phased out completely. This differs from the first round of stimulus payments, where payments were phased out if an individual had an income of $99,000 or more. Married joint filers making up to $150,000 are eligible to receive a total of $1,200. Additionally, for each dependent a single filer or married couple claims under the age of 17, they will receive an additional $600. If the dependent was born in 2020, the additional $600 can be claimed after filing a 2020 tax return. The IRS will look at your 2019 tax return to calculate your stimulus payment, so a child born in 2020 won’t be factored in just yet. For those who aren’t required to file tax returns, you can enter your payment information in this IRS tool.
How Much Will I Receive?
- Single filers with an income that does not exceed $75,000 are eligible for the full $600 stimulus payment. For every $100 of income beyond the $75,000 mark, payments shrink by $5.
- Married couples who file jointly with an overall income that does not exceed $150,000 are eligible for the full $1,200 stimulus payment. For every $100 of income beyond the $150,000 mark, payments shrink by $5.
- Whatever your filing status may be, you can expect an additional $600 for every dependent you claim under the age of 17. If your child was born in 2020, you won’t be receiving the additional $600 just yet, as the stimulus checks are based on 2019 tax filings. However, you will be able to receive the money when you file your 2020 tax return.
How and When Will I Receive My Stimulus Payment?
Stimulus payments are being delivered via direct deposit or physical checks. To reduce costs and expedite delivery, the IRS would prefer depositing payments electronically instead of mailing physical checks.
- Direct Deposit: If you’ve already filed your 2019 taxes and provided your direct deposit information to the IRS, you’ll be receiving your payment via direct deposit. The latest coronavirus relief package requires payments to stop being sent on January 15. If your payment has not been issued by that date—either by direct deposit or physical check —you can claim the amount you’re owed on your 2020 taxes. You can check on the status of your payment by using the IRS’ Get My Payment tool on their website.
- Physical Checks: If you don’t have direct deposit set up, or if you’d prefer to receive a physical check, the IRS will mail you one. To find out when you can expect your physical check, you can reference the IRS’ Get My Payment tool.
Will I Have to Pay this Money Back?
No, you won’t have to pay this money back. The stimulus payment is not a loan and you’re free to save, spend, invest, or donate it as you please. A lot of the confusion stems from the payment’s technical terms, as it’s referred to as an advance refund of a 2020 tax credit. This payment is a unique and fully refundable tax credit and won’t affect your return when you file next year. Additionally, this payment is not considered taxable income. You won’t owe any taxes on your stimulus check and it won’t affect your income tax bracket for 2020.
For more information on the second wave of stimulus payments, visit the IRS website.
Still have questions? Contact your local credit union to see how they can help.