As COVID-19 continues to impact the United States, the federal government is taking action to ease the burden on taxpayers. Most recently, the Senate passed a massive stimulus package (the House voted yes, too) and the CARES Act was signed into law. A key feature of the stimulus is individual checks.

As with anything tax-related, there’s a little bit of confusion. To help you sort it out, here are a few questions and answers:

When will I get my check? Checks are supposed to be produced “as rapidly as possible.” They began being distributed in mid-April. One thing that is true: if you use direct deposit, you’ll get your money faster.

How big will my check be? Checks will be $1,200 per adult – or $2,400 for married couples filing jointly – and an additional $500 per child.

Are there income limits on checks? The amount of the checks would start to phaseout for those earning more than $75,000 ($150,000 for joint returns and $112,500 for heads of household). This is adjusted gross income (AGI), not taxable income – so before your standard or itemized deductions. You’ll see your number on line 8(b) of your form 1040:

Wait, how does a phaseout work? Phaseout means that the benefit goes down as income goes up. In this case, for every $100 of income above those thresholds, your check will drop by $5. So, if you are a single filer earning $75,100, your check will be $1,195 ($1,200-$5). If you are a single filer earning $85,000, your check will be $700 ($1,200-$500). If you do the quick math on that, it means that you’ll phaseout completely (meaning that you’ll get nothing) once you hit $99,000 as a single filer, $198,000 as a married couple filing jointly, or $136,500 for heads of household.

What about limits on kids? There are no limits on the number of children that qualify. The definition of a child will be the same as for the child tax credit (you’ll find the age and other requirements at that link).

Will I need a Social Security Number to get a check? Yes. Or in the alternative, an adoption taxpayer identification number. Ditto for spouses and kids.

So how does this work? Do I need to file anything to get my check?  Technically, the checks are advances of a new, temporary credit for 2020. It will not affect your “normal” refund in 2020, nor how much you owe. Since we haven’t filed for 2020 yet, the IRS will “advance” your check based on your most recently filed tax return (2018 or 2019 tax return). If you haven’t filed a tax return, and your income is from Social Security benefits, the bill allows Treasury to use the information on your 2019 Form SSA-1099, Social Security Benefit Statement, Form RRB-1099, Social Security Equivalent Benefit Statement (after some initial confusion, this was confirmed by the Treasury and IRS).

Okay, I don’t understand. What is a refundable tax credit? A refundable credit means that you can take advantage of the credit even if you do not owe any tax. Unlike with a nonrefundable credit, if you don’t have any tax liability, the “extra” credit is not lost but is instead refunded to you. 

In this case, the stimulus check acts like a refund for a new, temporary tax credit that you get in advance based on your 2020 income. That’s confusing because you don’t know how much you’re going to earn in 2020, but it’s why the IRS is using earlier returns. But since it’s an advance payment on a new credit does not affect your “normal” tax refund for 2020: you won’t lose out on your expected tax refund for 2020 with the check.

Can you give me an example? Sure. Let’s say you’re entitled to a stimulus check for $1,200 and you get your check this year (in 2020). Let’s also say that you were expecting a $1,500 refund in 2021 (for the 2020 tax year). When you get your stimulus check, that doesn’t change your expected refund: you would still qualify for the $1,500 in 2021. But what if you didn’t get your stimulus check because you didn’t file in 2018 or 2019 – or some other reason? You’ll still get your $1,500 in 2021 but you’ll also get the $1,200 in 2021. Either way, you won’t miss out by taking the check and you don’t have to pay it back.

What if I don’t get the right amount? When you file your 2020 tax return, the IRS should compare numbers. If you should have gotten a check and didn’t, or if you should have gotten more than you did because the IRS didn’t know something important (like you have a kid), you should get more money – see my example above. If the numbers on your 2020 tax return suggest that you got more than you should because of your income, you should not have to pay it back. Don’t worry: most taxpayers should get just the right amount.

What if I am expecting a refund for the 2019 tax year? Your 2019 refund will not be affected by the stimulus check.

Is my check taxable? No. This is not taxable income.

How will I get my check? Direct deposit, if you’re lucky. The IRS will deposit your payment directly into the same banking account you used for direct deposit on your last filed return.

But what if the IRS doesn’t have my direct deposit information? You may need to register with the IRS to get your check.

What if I’ve moved? Under the law, the Treasury must send notice of the payment by mail to your last known address. The notice will include how the payment was made and the amount of the payment. The notice will also include a phone number for the appropriate point of contact at the Internal Revenue Service (IRS) if you didn’t receive the payment. You can help make sure that it goes to the right place by updating your address after a move. Usually, you’d do that on your tax return, but you can also submit a federal form 8822, Change of Address (downloads as a PDF). It generally takes four to six weeks to process a change of address.

What if I haven’t filed for 2018 and 2019? Do it soon, even if you have a simple, zero return. And don’t forget to include your direct deposit banking information on your return.

What about retired folks? Retired seniors are eligible so long as they meet the other criteria (Social Security numbers, income thresholds, etc.). As noted above, if you depend on Social Security but normally don’t file a tax return, Treasury will rely on your SSA-1099 form (or RRB equivalent) to figure and send your check.

What about those on government benefits? And those with no income? Yes, eligible folks include those with no income, as well as those whose income comes entirely from benefit programs like as SSI or SSDI benefits. I’ve seen a lot of confusion about this: it’s because one of the original proposal limited the checks to those who earned income. This is no longer the case.

Will I still get the check if I owe the IRS some money? Yes. If your refund would normally be seized to pay a tax debt, that shouldn’t happen here. Shouldn’t. Assuming it works as planned.

What if my check is normally seized for child support? Child support is an exception to the “we won’t offset your check” rule. Under the law, your check can be seized for child support arrears.

This is a done deal, right? Yes. It passed in the Senate on Wednesday night and the House on Friday. The President has signed it.

So no changes? I didn’t say that. There could be additional guidance from the IRS.

I still have SO.MANY.QUESTIONS. We all do. You can find some more answers here.

Not that I don’t trust you, but where can I find this in writing? You can read the Congressional Record, which notes the discussion about the checks, the vote, and the text here (downloads as a PDF). The IRS has confirmed some of this information and will eventually post more information on its website.

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Author

Kelly Erb is a tax attorney, tax writer and podcaster.

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