The U.S. Senate recently passed the CARES Act which was put in place to help stabilize the economy in the wake of the Coronavirus containment efforts. One of the key items in the bill are the stimulus checks that the IRS will issue to individuals and their children. In this article we will review:
- The amount of the IRS checks
- What makes you eligible to receive a check
- Income Limitations & Phaseouts
- When To Expect The Payment
- Direct Deposit vs Physical Check
- Unanswered Questions That Need Clarification
IRS Checks To Individuals
The government plans to immediately begin issuing checks directly to individual taxpayers. Individuals that qualify will be eligible to receive a check for $1,200 plus $500 for each child.
Example: A household that has 2 parents and 3 children may be eligible to receive a payment from the IRS in the amount of $3,900.
Parent 1: $1,200
Parent 2: $1,200
Child 1: $500
Child 2: $500
Child 3: $500
Are You Eligible To Receive A Check From The IRS?
Whether or not you receive a check from the IRS will be depend on your taxable income for either 2019 or 2018.
- Single Filer: Less than $75,000
- Married Filing Joint: Less Than $150,000
There is a phaseout of the payments between:
- Single Filer: $75,000 – $99,000
- Married Filing Joint: $150,000 – $198,000
Once above the income limits for a single filer of $99,000 and the joint filer of $198,000, you will not be eligible to receive a check.
If you already filed your taxes for 2019, the IRS will look at your 2019 tax return. If you have not filed your taxes for 2019, then the IRS will look at your income on your 2018 tax return. If you did not file a tax return for either year, then the IRS will look at your wages that were reported to social security in those tax years.
What If You Have Less Income In 2020?
But what happens if you were over those income limits for 2018 and 2019 but because of the Coronavirus, your income will be lower in 2020 making you eligible for the payments? You will not receive a check like everyone else but you will be able to capture the payments as a tax credit when you file your 2020 tax return. The payments from the IRS are really “tax credits” that the government is sending to individuals in advance of the filing of their 2020 tax return. Instead of making individuals wait to file their 2020 tax return, the IRS is sending the money to these individuals now.
Second scenario, what if your income was lower in 2018 and 2019 qualifying you for the IRS check but in 2020 your income will be above the threshold. Answer, we don’t know. As of right now there does not seem to be language in the bill saying that they’re going to recapture the credit when you file your 2020 tax return but this is one of those items that will need to be addressed by the IRS after the fact.
How Long Will It Take To Get The IRS Check?
This is the biggest question mark right now. It seems like the IRS is going to direct deposit these payments to your checking account for anyone that has ACH instructions on file with the IRS. If you have ever received a refund or made tax payments directly from your checking account, this would apply to you. However, what if someone no longer has that bank account? We are not sure how that is going to work. The direct deposits may happen sometime in April.
If the IRS does not have bank account instructions on file, they will have to cut physical checks. The last time Congress issued checks to people as part of a stimulus package was 2008 and it took 2 months for those checks to arrive. If this follows a similar path, individual taxpayers might not receive these IRS checks until May but this is another item that still needs to be addressed by the IRS.
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.