Stimulus Checks

 In Financial Planning

Update: Many people who have direct deposit information on file with the IRS have received their stimulus checks as of April 18th. If you have not received the payment, and are eligible-see below- you can input your information via this IRS website.

The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act was recently passed which provides economic relief for individuals and businesses affected by the ongoing health and economic crisis. I wrote a detailed overview of the many parts of the Act which you can find here. This article will provide details for the part of the Act that provides stimulus checks to individuals and families.

Who qualifies for a check?

According to the Tax Foundation some 94% of taxpayers will be eligible for a stimulus check of some amount if they meet all of the following criteria:

  • You must be a U.S. citizen / legal resident
  • You must have a work-eligible Social Security number
  • You cannot be a named dependent of another taxpayer

What is the size of the check?

The check amount is $1,200 for individuals and $2,400 for couples filing a joint tax return. Also, there is an extra $500 added for each child in your household under the age of 17. So, for example a married couple with 2 children under the age of 17 should expect a check for $3,400 ($2,400 is $1,000).

Not everyone will be receiving a check- hence the 94% number above- or the check could be reduced depending on your Adjusted Gross Income (AGI). If your AGI is above the following amounts the check will be reduced and then eliminated:

  • Married Filing Jointly – $150,000
  • Head of Household – $112,500
  • All other Filers – $75,000

The check is reduced by $50 for every $1,000 your AGI is above the thresholds. If you would like to calculate your check amount you can use this calculator.

The AGI number that is being used to calculate the size of your check is coming from your filed tax return, so there is some gamesmanship- completely legal – which can be used. If you have not filed your 2019 return already, the IRS will look at your 2018 return instead. So, here is where the gamesmanship comes into play.

If your stimulus check would be more favorable based on your 2018 return, you may want to wait to file your 2019 return which has an extended deadline for filing of July 15th.

If your stimulus check would be more favorable based on your 2019 return, go ahead and file your return and you can still delay any payments until July 15th. This does not guarantee that you the 2019 return will be used because of timing but it does not hurt to file now.

How do I receive a stimulus check?

Most people who are eligible for a check will receive it as a direct deposit into their bank account with no further action required. The CARES Act authorizes the IRS to electronically distribute the payments using the bank account that is on file from the filing of your tax returns. If you have not filed a return recently, or have concerns about your bank information, check the IRS website created for the CARES Act for instructions.

When will I receive my stimulus check?

The goal and intent of the Act is to get these checks out as soon as possible to those that are eligible. The timeline that has been discussed is 3 to 4 weeks, but I can tell you from experience dealing with other aspects of the CARES Act, that things have not been as smooth as they should. I would expect that checks will start showing up as direct deposits mid to late April.

Unfortunately, for those that do not use direct deposit when filing their taxes it could be longer as those checks have to be mailed out.

What should I do with my stimulus check?

For the vast majority of people receiving a check, I would recommend you keep it in a savings account or use it to pay living expenses. We don’t know when and what type of economic recovery we will have so it is better to be safe and liquid. When we come out the other side of this crisis, and we will, you could re-evaluate your cash position and use it to pay down debt or pad an emergency fund, but until then “cash is king.”

If you have questions or would like to discuss your financial situation, please feel free to schedule a call here. During this time I am trying to keep my calendar as open as possible.

Bill Nickles


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