7 Things You Need to Know about the COVID-19 Economic Impact Payments
Reading time: 4 Minutes
April 15th, 2020
So far, more than 16 million Americans have filed for unemployment due to job losses resulting from the COVID-19 pandemic. Here in Hawaii, that includes more than 160,000 unemployment filings in March 2020 alone. But some relief is on its way: at the end of March, Congress passed a $2 trillion-plus stimulus relief package, known as the Coronavirus Aid, Relief and Economic Security (CARES) Act, designed to help support American families and businesses during this international pandemic.
The portion of the Act designed to directly benefit U.S. citizens, economic impact payments of $1,200 for most eligible Americans, plus $500 for each dependent child under age 17, are starting to hit people's bank accounts this week.
Interested about what this stimulus entails, whether you're receiving a check, and what to expect? Here are seven things to know about the economic impact payments:
1. Most people don't need to take action to receive payment.
The Internal Revenue Service (IRS) and the Treasury Department announced that distribution of economic impact payments will begin this week and no action is required for most people. The IRS will calculate and automatically distribute stimulus checks, either directly deposited into the same bank account where you receive your tax refunds or in the form of a paper check that will arrive by mail. The U.S. government is prioritizing initial payments toward Social Security beneficiaries and low-income Americans.
2. The amount you receive is based on your income.
Economic impact payments are allotted in a few different categories: Individuals with an adjusted gross income (AGI) of $75,000 or less per year and heads of households with an AGI of $112,500 or less per year will receive $1,200, while married couples filing jointly whose combined AGI is $150,000 or less per year get $2,400. People who aren't normally required to file a tax return, such as senior citizens and Social Security recipients, may also receive $1,200.
However, individuals and households will be paid $50 less for every $1,000 they earn over the limits, up to a certain amount. So, for example, if you're a single tax filer and your AGI is $80,000, then you'll receive a $950 stimulus check. If your AGI is $90,000, you'll receive a $450 stimulus check.
The total phase-out amounts—meaning, if you earn this much money a year or more, you won't receive a stimulus check at all—are incomes over $99,000 for single filers, $136,500 for the heads of households, and $198,000 for married couples filing jointly.
3. You'll be notified after funds have been dispersed.
Economic impact payments will be directly deposited into the bank account listed on your 2019 or 2018 tax returns. If no account is listed, the IRS will mail a paper check to the most recent address they have for you on file. By law, the U.S. Treasury must also mail a notice of payment to your last known physical address. This notice will also include an IRS phone number to contact if you don't receive the payment.
4. You can still qualify when filing your 2020 tax return, even if you didn't qualify based on previous returns.
Those that may have already filed their 2019 taxes and earned too much to qualify for an economic impact payment—but who have since become unemployed—will still be able to claim the stimulus on their 2020 taxes.
This isn't necessarily helpful for people who are struggling without income right now, but an important thing to keep in mind is that a stimulus check may still be available. In the meantime, Bank of Hawaii has recently initiated two financial assistance programs, in the form of loan forbearance and extensions, to help customers facing financial hardship as a result of COVID-19.
5. Your payment isn't affected even if you owe the IRS money.
Although the federal government can take your annual tax refund and apply it toward any money owed to the IRS, stimulus checks will not be seized to pay tax debt. The only instances where an economic impact payment might be withheld is if you owe child support money, or if you're currently overdrafted with the bank handling your direct deposit.
6. 17-year-olds and most dependent college students won't qualify for economic impact payments.
Individuals and families with children ages 16 and younger who are claimed as dependents on their taxes will get an extra $500 per child as part of the CARES Act. However, 17-year-olds and many of the roughly 20 million college students in the United States that are claimed as dependents won't get checks, and their guardians won't receive an extra $500.
Even if parents haven't filed their taxes yet and are hoping not to claim their children (so that the kids may file a simple tax return to become eligibility to receive a stimulus check), students under the age of 24 are considered dependents by law if someone else provides more than half their support and they aren't married and filing a joint tax return.
7. Be vigilant about coronavirus-related scams.
The IRS is warning taxpayers to be cautious of phone calls and email phishing attempts, which can lead to identity theft or tax-related fraud. Especially in light of concerns about COVID-19, scammers may be aiming to capitalize on any recent confusion related to the coronavirus or economic impact payments.
As a reminder, the IRS will never initiate contact over email, text messages, or social media channels to ask for personal financial information or to request money. Other red flags of a possible scam include the use of casual phrases such as “stimulus payment" or “stimulus check" (the official term is economic impact payment); messages suggesting tax refunds or economic impact payments may arrive sooner if taxpayers provide banking information via email, text, or social media; and the arrival of bogus checks requiring a phone call or personal information verification in order to be cashed.
The IRS encourages people to forward any unsolicited emails to email@example.com. To learn more about suspected scams, visit the Report Phishing and Online Scams page at IRS.gov.
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