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When President Trump signed the Coronavirus Aid, Relief, and Economic Act, or CARES Act on March 27, 2020, that initiated a $2 trillion stimulus package.
This is the largest emergency relief bill in American history to provide to Americans in the coming weeks. Most importantly, part of the relief package is a one-time cash payment (stimulus check) of up to $1,200 to those Americans who qualify.
Updated: A 2nd stimulus relief bill has been passed by Congress. However, the one-time cash payment is only up to $600 to Americans who qualify.
Had someone told us in February that the stock market would crash, we would be asked to stay home for weeks, businesses and schools would be closed, and the government would be working to pass a relief package for all Americans, we would not believe it.
Reflecting back to when this started was not that long ago.
On the other hand, it is a real life situation and we are here. An extra $1,200 sounds great. With the announcement of the stimulus package, there’s always questions to be answered.
What is it? Who gets it? What do I have to do? When is it arriving? How much will I get?
Below, we’ve answered those questions. Continue reading for what you need to know about the stimulus check package.
What is a stimulus check?
The payment that the government is calling a “stimulus check” is basically a tax credit. Ultimately, this will offset some your 2020 federal incomes taxes.
The goal of is to provide relief for economic hardships caused by the coronavirus crisis. That is to say, the government hopes this approach stimulates the economy by providing consumers with some spending money.
Most importantly, understanding the purpose of the stimulus check will help you understand how to best use the money you will receive.
Will I receive a check?
First off, almost all American adults with a Social Security number will receive a government stimulus check this year.
Each individual will receive up to $1,200, $2,400 for couples filing jointly, and $500 for each child under the age of 17.
However, if you’re claimed as a dependent adult by someone else, the person claiming you on their taxes will receive the stimulus payment in their household check.
Most importantly, the payments are phased out or reduced based on your adjusted gross income (AGI). Here’s how the phaseout works:
- $75,000 for singles
- $112,00 for heads of households (often single parents)
- $150,000 for married couples
- Singles without kids are completely phased out at $99,000 and married couples at $198,000
Above all, this means your check will start to be reduced if you make more money than the above amounts. In addition, the rate is $5 less for every $100 in income above those adjusted gross income amounts.
Updated: Click here to find the details related to the 2nd stimulus check relief package.
Do I have to do anything to get a stimulus check?
No. In other words, the process for receiving your check is automated for most Americans who qualify. You do not have to do anything or sign up to receive the payment.
If you files taxes:
To be eligible for a check, you must have a Social Security number. People without Social Security numbers, nonresident aliens, and adult dependents are not eligible.
Consequently, your adjusted gross income on your 2018 or 2019 tax return must reflect below $99,000 for single filers, $136,500 for heads of household, and $198,000 for married filers.
Most importantly, if you have changed direct deposit information or moved, and have not updated your information with the IRS, do so now.
As a result, you will receive your stimulus check on time. On the other hand, you will potentially wait several weeks or months to get paid if this information is not up-to-date.
Meanwhile, the IRS is developing an online portal to collect bank details from people in this type of situation.
If you don't file taxes:
If you get Social Security payments but don’t file taxes, the government will use your information on file for your payment.
On the other hand, if you don’t get Social Security payments or file taxes, the government has developed an online registration tool for stimulus checks.
When will my stimulus check arrive?
According to Forbes, checks will start to arrive the week of April 13th. For taxpayers who use direct deposit, the payment is expected to arrive mid-April.
On the other hand, for those taxpayers who don’t use direct deposit, it could take much longer. The IRS expects this entire process to take roughly 20 weeks to complete.
Lower income taxpayers will receive priority, and those individuals receiving Social Security income will receive their stimulus check just as they would their Social Security checks.
That is to say, it is not exactly clear when they payments will be issued. The IRS is only providing timelines, but it could take longer than expected, similar to what happened in 2008.
So, make sure you are using the direct deposit method. Ultimately, you will receive your payment a lot quicker than getting a paper check.
Updated: The 2nd round of stimulus checks will arrive via direct deposit starting late December 2020 to early January 2021.
How much money will I receive?
The amount of money you receive is based on your adjusted gross income, if you file as single or married jointly, and if you have kids.
- A married couple with three kids making a combined $140,000/year will receive $3,900.
- A single parent with one kid making $65,200/year will receive $1,700.
- A single person making $89,000/year will receive $500.
- A married couple making $183,000/year with one kid will get $1,250.
- A married couple making $220,000/year with one child will not receive a check.
What should I do with my stimulus check?
Above all, this is one of the most important questions you may have. Ultimately, it depends on your financial situation. Most people will need to understand where they are and prioritize their financial needs.
That is to say, the best places to focus your money are:
- Cover your necessities (food, shelter, utilities, transportation). Certainly, take care of your family first. That’s why you need to make sure your priorities are in the right order.
- Build a clutch fund (aka emergency fund). Most importantly, a clutch fund is created to help you with unexpected expenses, medical emergencies, job loss, or a decrease in your income. Putting your stimulus check to the side in a money market account is a really good financial move to prepare you for any of those situations. To clarify, your clutch fund is insurance and not an investment.
- Pay off debt. With a stable job, necessities covered, and you have a clutch fund, then send your check to debt. Since this money is not considered taxable income, it is a good idea to consider paying off debt with it.
- With all of the previous steps taken care of, consider investing or giving your check to someone in need. We only recommend taking this step if you are completely secure with your finances, including your mortgage/rent. Another option to consider is simply paying extra on your mortgage/rent to be ahead of schedule.
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What ways can I prepare myself financially?
One thing that we are seeing over and over again is more people looking for online jobs. Ultimately, this is so they can work from home right now and potentially in the future.
So, we recommend that you work to secure yourself financially and your future.
Some helpful articles that we recommend reading include:
- Financial Security: The Secrets to Generational Wealth
- Budgeting 101: How to Create a Budget
- Coronavirus: Preparation over Panic
Questions for our readers?
- Over the next few weeks, would you like to see more information that isn’t directly related to the Coronavirus? Or, is the information helpful to what is happening in the world? We are hearing different perspectives.
- How are you being impacted right now?
If you’d like to chat, please comment below. We are here for you!
Final Words: 2020 Stimulus Check
In conclusion, the stimulus checks being provided by the government are meant to provide some assistance and relief during this crisis.
That is to say, you must have a plan and your priorities in order prior to receiving this money. So, the next few weeks are going to be unpredictable, however make smart money choices with your check to secure yourself as much as possible.