Stimulus Checks: What You Need to Know

The latest economic news is certainly bleak, as the novel coronavirus takes a terrible toll. Stimulus checks are on the way, but millions are still waiting.

Economists at JPMorgan (NYSE:JPM) are predicting that GDP (Gross Domestic Product) will plunge by 40% in the second quarter and unemployment will hit 20%. This would represent the most significant downturn since the Great Depression.

stimulus checks
Source: Maryna Pleshkun/

And yes, the federal government has acted swiftly to enact a $2 trillion stimulus package, called the CARES Act (Coronavirus Aid, Relief and Economic Security Act). It has funds for small businesses, states, and unemployment benefit programs. There is also an initiative to send stimulus checks to U.S. citizens.

So what are the requirements for this? Let’s take a look:

Income Limitations

The maximum amount for the stimulus checks is $1,200 for adults and $500 per each qualifying child. This is so long as your income does not exceed the following:

  • $75,000 for individuals
  • $112,500 for heads of household
  • $150,000 for married couples filing joint returns

Note that the income is for AGI (Adjusted Gross Income). This is equal to your income that is subject to taxes, like wages, self-employment income and interest, which is subtracted from certain adjustments, such as alimony payments and contributions to retirement accounts.

Now if your AGI exceeds the levels for the stimulus program, then there will be a $5 reduction for each $100. This means that you will not receive a check if you make more than $99,000 if single, $132,500 for heads of household, and $198,000 for those who are married and file jointly. You can also use Intuit’s (NASDAQ:INTU) stimulus check tool to make the calculations.

“All income figures are based on 2018 tax returns unless you have already filed your 2019 tax return,” said Riley Adams, who is a CPA and operates Young and the Invested. “If you received too little or your 2018/2019 return disqualified you but your 2020 return will make you eligible, you will receive the difference when you file your 2020 return in 2021.”

Other Requirements for Stimulus Checks

Even if you meet the income requirements, there are some other rules to consider. For example, you cannot be claimed as a dependent on someone else’s return and you must have a valid Social Security number. What’s more, if you have failed to pay child support, then this liability will be offset by the stimulus check. But this does not apply to other government debts, such as back taxes.

Keep in mind that the IRS is administering the issuance of the stimulus checks. This means that you will have had to file a tax return for either 2018 or 2019. If you used direct deposit, then you will get your stimulus payment electronically. Otherwise the IRS will send you a check. In other words, make sure you update your address with the IRS (here’s how to do this).

But there is an exception to the filing requirement — that is, if you receive Social Security, Survivor, Railroad Retirement, or Disability benefits.

“Economic stimulus payments are expected to arrive by direct deposit as early as April 13th if the IRS has the individuals’ bank account information on file,” said Jasmine Young, who is a CPA and owner of Southern Tax Preparation & Services, in Atlanta, GA. “Individuals who do not have a filing requirement can use the IRS’s Non-filer’s tool to provide bank account information to receive their payment by direct deposit.”

However, if the filing exception does not apply to you and you have not filed a return for the past two years, then you will need to do so to get your check. It’s probably best to do this electronically. A paper return could take a couple months to process.

When Will You Get Your Stimulus Check?

Given the huge scale of the stimulus program, there have been major glitches. Already there are reports about errors on the payment amounts. And so far, there is no guidance on what actions to take resolve these (it also does not help that the IRS has lower levels of staffing because of the coronavirus).

Interestingly enough, there are other cases where the agency has made payments to closed bank accounts. In these situations, the taxpayer will get a paper check.

To help with the process, the IRS has setup an app to track your stimulus check.  Yet there are various reports that the app is having technical difficulties as well.

“People with a direct deposit should be receiving their payments already,” said Brian Dechesare, who is the founder of Mergers & Inquisitions. “Those receiving paper checks will, unfortunately, have to be a bit more patient. The checks being sent through the mail probably won’t start going out until early May. The plan is to send them out in waves with the lowest incomes receiving their checks the soonest. Individuals above the $75,000 income threshold but below $99,000 might not receive their checks until sometime in August.”

Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence BasicsHigh-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.  As of this writing, he did not hold a position in any of the aforementioned securities.

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