Terry’s Columns Stimulus Checks and Care Act Changes — Everything You Need to Know!

Stimulus Checks and Care Act Changes — Everything You Need to Know!

By Terry Savage on March 30, 2020

Note: This is a relatively long special post designed to answer your questions about the Care Act stimulus program. First posted Sunday night March 29th, it will be updated as necessary.

UPDATE March 31st: OK, I’m swamped with your questions! I can’t answer each individually. Here is an update to address some of the most frequently asked questions (with thanks to experts at TurboTax).
• No one knows WHEN you will receive your check or direct deposit.
• If you already filed for 2019 and got/will get your REFUND check by mail, don’t fool around with direct deposit now. Your stimulus check will come in the mail! BUT, the IRS says it is creating a web portal soon to allow people to input direct deposit info. I will update this post with that info when it becomes available.
• If you haven’t filed for 2019 yet, DO IT NOW. (Check TurboTax.com for free filing and advice from CPAs). Use your latest information and get any refund direct deposited to your current account.
• Children under 17 who are a dependent on your return are each “worth” $500 to you. But if older than 17, even if declared as dependents, you do not get a check – ie aging parents, older child who is a student.
• If you are dependent on anyone’s return, you will NOT get a stimulus check – even if you filed your own return from part time work.
• If you are married but filing separately, you should each get a $1200 check – if each filer falls below the $75,000 AGI level (or the phase-out – see article). Similarly, head of household will get $1200 check if qualified by income.
• HOW WILL THEY FIND ME?! A surprising number of people wrote asking how the government would find them if they do not file tax returns, do not get SS checks, or disability checks, aid for dependent children, or other government benefits.
The latest word from the IRS is that they will soon provide information for people who are not otherwise required to file on how to create a special, simple 2019 tax form (even with no income reported) to give information about your filing status, number of dependents,and direct deposit bank account information, if you have a bank account, or mailing address. Look for updates on this form at IRS.gov/coronavirus.

Please note that this entire Stimulus Package is a work in progress. The process could take weeks to complete. As I have other updates, I will post them here.


Who gets what – and when? That’s the question everyone is scrambling to answer. With the help of TurboTax, CPA and tax expert Lisa Greene-Lewis, here are some answers to your most basic questions. If I didn’t answer your issue, please post your question on my “Ask Terry” blog – and I will do my best to get answers from the experts.

Here are the basics. The Coronavirus Aid, Relief and Economic Security Act (CARES) — is a $2 trillion stimulus package to provide financial relief to individuals, families and businesses. It is a vast and complex plan, with the aim of getting money into the system as soon as possible.

This column will focus on issues related to the actual stimulus payments and qualifications, along with changes in income taxes, student loans, retirement plans, unemployment benefits, and other issues related to personal – as opposed to business – finance.

Who Gets A Check, and How Much?

The plan provides up to $1,200 for each adult and $500 for each child under 17. A married couple with two children would get $3,400.

The exact amount will be based on information from your most recent tax filings, either 2019 or 2018 if you have not yet filed this season. If you have an adjusted gross income (AGI) of up to $75,000 ($150,000 married filing jointly), you should be eligible for the full amount of the recovery rebate.

As your AGI increases, the stimulus amount you get will go down. The stimulus rebate completely phases out at $99,000 for single taxpayers, $146,500 for those filing as Head of Household and $198,000 for joint filers with no kids, according to TurboTax.

Exceptions: Seniors who are claimed as a dependent, perhaps on an adult child’s return, having provided more than half of their support for the year, will not receive payment. Similarly, students who are dependents on a parent’s return will not get a stimulus check.

*Note from TurboTax: adjusted gross income (AGI) is your gross income like wages, salaries, or interest minus adjustments for eligible deductions like student loan interest or your IRA deduction. Your AGI can be found on line 8b of your 2019 Form 1040.

How Do I Receive Payment?

This is not necessarily a case of “the check is in the mail.” Last tax season close to 72% of taxpayers received a tax refund and the average direct deposit tax refund was close to $3,000. But 4 out of 5 taxpayers who received their refunds did so via direct deposit last tax season. Similar numbers are expected for this filing season.

That’s important because it’s the same process that will be used to send out stimulus checks – direct deposits first, then paper checks mailed to the filing address. (Note: there is some discussion in the Treasury department about exactly how the non-direct-deposit refunds will be paid, with consideration of a debit card as a possibility.)

ADVICE: File your 2019 tax return as soon as possible – not only to get any refund check, but to get the most accurate payment information on record with the IRS. Have any refund processed electronically to your bank account, thus assuring that your stimulus check will also land in the correct place as quickly as possible!

What if You Were Not Required to File A Tax Rerun Because of Low Income?

The threshold for filing requirement is $12,200 on a single return, and $24,400 on a joint return. Seniors (age 65 and older) get an additional exemption of $1300 if they are married filing jointly, making their total income required to file an individual return $25,700 if one spouse is 65 and over and $27,000 if both are 65 and older. If you are single you get an extra $1,650, making the total required to file your taxes $13,850 if you are 65 or older.

Seniors who receive Social Security, or those low-income non-filers who receive Social Security Disability payments will be easily “found” by the system and will receive their stimulus checks based on info from your 2019 SSA-1099, receiving the stimulus payment in the same way they receive their monthly benefits checks.

Similarly, those on other government assistance programs will likely receive their “checks” through the program – although they are still working on details of whether the money would come on a debit card or in another format.

What if I Just Lost My Job, but Don’t Qualify For a Check Based on 2018 or 2019 Income?

You are in a tough spot – and likely are among those who need this check the most. If your 2018 or 2019 income is too high for you to qualify, you would not get a stimulus check automatically deposited in the next couple of weeks, but you may see it in the form of a tax credit when you file your 2020 taxes in 2021, since the credit is technically for 2020. (I know that’s small comfort.)

What if You Don’t Have A Bank Account to Cash Your Check?

There is a small but significant slice of the population that is “unbanked” – does not have a regular checking or savings account. Many times these people cash their benefits checks at a currency exchange, paying a fee as high as 3%. There is word that the program would forbid charging a fee to cash a stimulus check, but that was not written into the bill.

Income Tax Implications of Stimulus Checks

These payments are NOT considered taxable income, and will not impact eligibility for certain other government programs and benefits. Even people who owe certain debts may still get a stimulus check, as the bill temporarily suspends some of the requirements to garnish tax refunds to repay debts, including debts owed to the I.R.S. itself, however this waiver may not apply to people who are behind on child support.

Increase in Unemployment Benefits

Unemployment payments will be increased by $600 weekly for four months through July 31, and the bill also includes those who were previously not eligible for unemployment, including part-time employees, freelancers, independent contractors, gig workers, and the self-employed.

ADVICE: This could be a time-consuming process as unemployment soars and state offices are backed up with applications. Hang in there, filing online instead of in person.

Also keep in mind that unemployment income is taxable income so make sure you have taxes taken out so you don’t get any tax surprises when you file your 2020 taxes in 2021. Also, once you start working again be sure to revisit your Form W-4 so you can have the correct amount of withholding taken out of your paycheck.

Waiver of Required Minimum Distributions

Required minimum distributions (RMDs) are waived for 2020, including those for inherited IRAs as well as traditional IRAs of those over age 70½. That means if you have already started taking RMDs, in 2020 you won’t have to take out money based on last year’s (2019) ending account value.

That waiver of RMDs applies to those currently taking withdrawals, and those who would otherwise start taking RMDs in 2020 based on the most recent SECURE Act rules. (In general, under the SECURE Act passed in December 2019, if you reach 70-1/2 in 2020 or later, you must take your first RMD by the April 1 of the year after you reach 72.)

If you have already taken money out of your account to fulfill your 2020 obligation, [update] you have 60 days to put it back into your account. Of course, if you need that money to live on, you can always take money out of your IRA. It will continue to be a taxable income distribution.

40l(k) Withdrawals Penalty-Free

Borrowing from your 40l(k) or 403 (b) plan at work should always be a last resource. But many will reach that point, I’m afraid. There’s a bit of relief in the plan if you must withdraw money from your retirement plan, including your IRA.

If you need to take money out of your retirement plan ASAP, the 10 percent early withdrawal penalty will be waived on up to $100,000 of retirement funds withdrawn. Additionally, income attributable to such distributions would be subject to tax over three years, and you may re-contribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions, says TurboTax.

Student Loans and Interest

There is a bit of good news as relates to student loan interest, but only for a short period of time. As part of the Care Act, lenders must stop all payments for federally held student loans through September 30, 2020. During that time, interest will not accrue on the loans. And nonpayment during that period cannot be used to affect credit scores or a person’s qualification for loan forgiveness.

Also suspended for the same period — any wage garnishment or tax refund reduction for people who have defaulted on their federal student loans. The act, however, does not have any effect on private student loans.

Also, it appears that borrowers with Perkins and commercially held Federal Family Education Loans will not qualify for suspended payments. That impacts a significant number of borrowers, so look for a “technical adjustment” to this portion of the bill.

Lenders must notify borrowers of these suspension provisions within 15 days of the bill signing – and also must notify borrowers in advance of the resumption of interest and payments.

IMPORTANT: Employers can make student loan payments on behalf of their employees on a tax free basis, up to $5,250 annually. This means the loan payments would be excluded from the employee’s income. The provision is applicable on loan payments an employer makes from the day the bill was signed into law (March 27, 2020) through Jan. 21, 2021.

(Show this to your company and tell them it’s a great benefit they could give their workers! For details on how to set up this plan for your company, go to www.Tuition.io.)

Delay of Payment of Social Security Taxes – Employer Side

Employers, including the self-employed, may be able to delay the payment of the employer portion of the Social Security payroll tax for the remainder of the year and pay back the liability over the next two years. But for those still working, the FICA tax will continue to be taken out of your paycheck.

Tax Deadlines Extended

Speaking of tax deadlines, the filing date for your 2019 taxes has been extended to July 15, 2020. And you can extend your required tax payment until that date as well. You do not have to file for an extension; it is automatic. Most but not all states have also extended their filing dates to July 15th.
(Illinois has announced it will extend deadlines to conform to the Federal July 15th date.)

That extension means you also have until July 15, 2020 to contribute to your traditional or Roth IRA, as well as your Health Savings Account and Archer MSA.

Note: If you file quarterly, you must still file your first estimate on schedule on June 15, 2020.

Here’s Help with Your Taxes — at Home!

TurboTax has come to your rescue. You can get help from a tax expert by connecting live via one-way video to TurboTax Live CPA or Enrolled Agent, with an average of 15 years-experience to get your tax questions answered. Agents are available in English and Spanish, year round and can even review, sign and file your tax return. There’s no need to leave your house to drop off any papers or go to an office.

Special Note: There’s FREE access to TurboTax Live CPAs and EAs, through April 4th, if you are filing the new 1040 tax form with no additional schedules, just W-2 income, limited interest and dividend income reported on a 1099-INT or 1099-DIV, if you claim the standard deduction, and perhaps the Earned Income Tax Credit and the child tax credit.

For more information on these services, go to www.TurboTax.com. And, again, my special thanks to Lisa Greene -Lewis of TurboTax for working with me long hours over the weekend to get the updated information.

As changes or new interpretations become available, I will continue to update this post. And again, please post your general questions (not personal tax questions) by clicking on “Ask Terry” and using the word “stimulus” in the headline of your question.

A final thought: If there’s anything more difficult than collecting $2 Trillion in taxes, it will be in distributing $2 Trillion to the appropriate individuals and businesses in the form of deposits, checks, or loan guarantees.
There’s bound to be confusion, disagreement, and fraud. And that’s The Savage Truth!



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