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The IRS estimates that around 85% of taxes are paid voluntarily and on time. But the tax gap, the difference between the taxes paid on time and those still owed, means hundreds of billions of dollars are missing every year. While politicians often look to increase or decrease taxes as a part of their platform, simply shrinking this gap by collecting the taxes due could solve problems and is fair to everyone.

There’s an estimated $574 billion tax gap per year

Charles Rossotti, the former IRS Commissioner, joins Kelly on this episode of the Taxgirl podcast to discuss how the tax gap can be shrunk. Charles goes over some of ways the IRS can be modernized to not only collect all the taxes due but ensure a smoother process for preparers and filers.

Listen to Kelly and Charles talk about the tax gap:

  • Charles’ article on how the government should target the tax gap instead of raising taxes
  • Where does the gap come from?
  • How the IRS can get those taxes
  • Why doesn’t Congress enact changes to close the tax gap?
  • The cost to close the tax gap
  • The importance of information reporting
  • Debunking the myth that someone’s taxes are too complex to audit
  • Reconciliation forms
  • How big the tax gap is compared to the average taxpayers

More about Kelly Phillips Erb:

Kelly is the creator and host of the new Taxgirl podcast series. Kelly is a practicing tax attorney with considerable experience and knowledge. She works with taxpayers like you every day. One of the things that she does is help folks out of tax jams, and hopefully, keep others from getting into them.

Kelly’s Website – Taxgirl

Charles’ Bloomberg article

Shrink the Tax Gap Website

The coronavirus pandemic has impacted everyone in different ways. While it has been difficult over the last year, filing your taxes could prove to be yet another hurdle in this pandemic. For those that have been telecommuting, there are likely going to be working from home tax complications.

Potential working from home tax problems

On this episode of the Taxgirl podcast, Kelly is joined by Timothy Speiss, the co-leader of EisnerAmper’s personal wealth advisors group. Kelly and Timothy break down some of the biggest potential problems people will face when filing their taxes this year. Whether you hunkered down out of state or simply live in a different state than where you work, working from home could further complicate things like your tax withholding amounts and which state you file with.

Listen to Kelly and Timothy talk about working from home taxes:

  • What tax concerns should employees and employers think about?
  • Tax apportionment factors
  • How changing where you live during the year impacts state taxes
  • What qualifies as residency for taxes?
  • Should you notify your employer when you change where you live?
  • What you should do if your employer didn’t change your residence
  • Working from home tax preparation advice
  • Check your pay stub for the correct withholding amounts
  • Correcting your employer not filing in the right state with tax credits
  • What can states use to prove your residency?

More about Kelly Phillips Erb:

Kelly is the creator and host of the new Taxgirl podcast series. Kelly is a practicing tax attorney with considerable experience and knowledge. She works with taxpayers like you every day. One of the things that she does is help folks out of tax jams, and hopefully, keep others from getting into them.

Kelly’s Website – Taxgirl

Timothy Speiss – EisnerAmper

Tax fraud is serious business and the IRS is looking for help to crack down on it. Paying IRS whistleblowers a reward is one of the tools the government uses to find and prosecute those cheating on their taxes. And it can be a lucrative business for both the IRS and the 

whistleblowers as they helped the government recover more than $6 billion in 2020.

Becoming an IRS whistleblower

On this episode of the Taxgirl podcast, Kelly is joined by Gregory Krakower. Gregory is a former senior advisor and counselor for the New York State Attorney General’s office, as well as an adjunct professor at Cardozo Law School where he teaches whistleblower statutes and corporate fraud.

Listen to Kelly and Gregory talk about IRS whistleblowers:

  • What is a whistleblower?
  • Are whistleblowers protected and rewarded?
  • The reward for IRS whistleblowers
  • Whistleblowers don’t have to prove fraud but do need information
  • What type of information do whistleblowers need to have?
  • The motivation behind IRS whistleblowers
  • The False Claims Act / Lincoln’s Law
  • Qui tam
  • Can a whistleblower bring a lawsuit separately?
  • One of New York’s biggest whistleblower cases
  • Can you sue an accountant for helping a client avoid taxes?
  • How long do whistleblower cases take?
  • How well has the IRS whistleblower provision worked
  • What should potential whistleblowers keep in mind?

More about Kelly Phillips Erb:

Kelly is the creator and host of the new Taxgirl podcast series. Kelly is a practicing tax attorney with considerable experience and knowledge. She works with taxpayers like you every day. One of the things that she does is help folks out of tax jams, and hopefully, keep others from getting into them.

Kelly’s Website – Taxgirl

Gregory Krakower – LinkedIn

Estimated reading time: 2 minutes

Traditionally, taxpayers who need assistance during the tax season can find programs that fit their needs. Unfortunately, due to COVID, 2021 already looks challenging. But don’t lose hope: help is still available.

VITA and TCE

The IRS isn’t ruling out opening Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites but they are not all open now. The IRS says that, “Due to COVID-19, a number of VITA sites and all TCE sites are closed for an undetermined period of time.”

VITA offers free tax help to taxpayers who generally make $57,000 or less, persons with disabilities, and limited English-speaking taxpayers who need assistance in preparing their own tax returns.

In addition to VITA, the TCE program offers free tax help for those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues unique to seniors.

Some VITA sites are planning to open. To locate an open VITA site near you, use the VITA Locator Tool.

AARP Foundation Tax-Aide

Other services, like the AARP Foundation Tax-Aide, provide in-person and remote tax assistance free of charge. The AARP has a special focus on taxpayers who are 50 or older or who have low to moderate-income. 

Tax-Aide volunteers are located nationwide, and are trained and IRS-certified every year to make sure they know about and understand the latest changes and additions to the tax code. Tax help is provided in safe environments using a variety of methods based on a number of factors, including where you are located, COVID-19 spread, and volunteer availability. 

The Tax-Aide webpage will be updated in early February with new features to make it easier for taxpayers to request tax help. Meanwhile, you can find some of the answers to your questions using the AARP Tax Aide’s Frequently Asked Questions page on the AARP website.

Free File

And, of course, keep in mind that free tax software is available through Free File. Free File is a public-private partnership between the IRS and Free File Inc. Free File is available to taxpayers whose adjusted gross income (AGI) was $72,000 or less in 2020: you can find your AGI by looking at line 11 on Form 1040. You can find out more about Free File here.

Chances are that you’ve already received notification about your second round of stimulus checks: this batch of checks is being issued much more quickly than the first round from 2020. The second round of checks is part of the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, signed into law by President Trump at 2020 year-end.

Since the new law took effect, I’ve been fielding emails, tweets, and messages from folks with questions about the second round of stimulus 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:

General Questions

What do I need to do to get my check? You don’t have to take any action to receive your checks: this second round of payments will be distributed automatically. 

How big will my check be? Eligible individuals will receive checks of up to $600 for individuals ($1,200 for married couples) and up to $600 for each qualifying child. 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).

What’s a phaseout and how does it affect the amount of my check? 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 it on line 11 of your 2020 Form 1040.

How does a phaseout work? Phaseout means that the benefit goes down as income goes up. It’s a 5% drop which means that 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 $595 ($600-$5). If you are a single filer earning $85,000, your check will be $100 ($600-$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 $87,000 as a single filer, $174,000 as a married couple filing jointly, or $124,500 for heads of household.

Does the phaseout apply to the dependent portion, too? Yes.

Eligibility

Are there 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. There was no “dependent fix” which means that children 17 and over do not qualify as a dependent for purposes of stimulus checks.

But my child is 17 and lives with me and eats all of the food in my house. Are you saying I don’t get a check for my kid? Yes. Qualifying dependents must be under age 17 on December 31, 2019. (Don’t send me hate mail, I have kids, too. I get it. Yell at Congress.)

Wait, the child tax credit requires that the child be related to me. So, if I take care of a child who is not related to me, I can’t get a check for that child? That’s correct. The child has to be related to you, such as your son, daughter, stepchild, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, grandchild, niece, or nephew) – and meet the other criteria for dependency. Foster children also qualify.

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.

What about ITINs? You need a valid SSN to get a check. However, if you are married to someone with an ITIN and you file jointly, this will not disqualify you from getting a check (your spouse will not receive a check). Additionally, if you are a married taxpayer filing jointly and at least one of you has a valid SSN, you will receive a check for your dependent (this is different from the CARES Act). But if both of you and your spouse do not have an SSN, your child will not receive a check even if your child has an SSN. Additionally, an ITIN won’t be accepted for a qualifying child.

Will seniors and retired folks get a check? Yes. Seniors and retired folks are eligible so long as they meet the other criteria (Social Security numbers, income thresholds, etc.).

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.

So I don’t have to work to get a check? No.

What if I normally work but I am unemployed? Still doesn’t matter. You don’t need to work to be eligible for a check.

My husband/wife/grandmother/neighbor died this year. Are they eligible for a check? A payment won’t be issued to someone who has died before January 1, 2020. And if you filed a joint return in 2019 and your spouse died before January 1, 2020, you won’t receive a $600 payment for your deceased spouse, but you’ll still be eligible for your check plus the amount for any qualifying children.

My husband/wife/grandmother/neighbor is in jail. Are they eligible for a check? Yes. An incarcerated individual is entitled to a check if all eligibility requirements are met. 

Will I still get the check if I owe the IRS some money? Yes.

What if my check is normally seized for child support? Yes, your second stimulus check will not be offset for any Federal or state debts. Your first stimulus check may have already been offset (the rules were different for the first round of payments under the CARES Act).

Timing and Payment

When will I get my check? Initial direct deposit payments began arriving last week. Paper checks were mailed beginning on Wednesday, December 30. Mailed payments, including those to check recipients who live abroad, will require more processing and mailing time.

How will I get my check? If you didn’t receive your earlier stimulus payment by direct deposit, you will receive a check or, in some instances, a debit card. If you don’t receive a direct deposit by early January, watch the mail for either a paper check or a debit card.

What if I changed or closed my bank account? If your account is closed, no longer active, or unfamiliar, your bank must return the payment to the IRS. If that happens, you won’t get your payment as a direct deposit: you’ll get a 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.

Can I update my bank account or my address online? No.

Status Of Your Check

How can I check on the status of my check? Use the Get My Payment tool on irs.gov: it’s updated once a day. You can find out more here.

But the Get My Payment tool ISN’T WORKING. What now? If you get a “please wait” or error message, the IRS says that’s normal and is due to the high volumes coming in. Check back later.

When I did come back to Get My Payment later, it still was not working. Now what? There is a limit to the number of times people can access Get My Payment each day. When people reach the maximum number of accesses, Get My Payment will inform them they will need to check back the following day.

What happens if Get My Payment says “not available”? If the tool shows “Payment Status #2 – Not Available,” then you will not receive a second Economic Impact Payment and instead you need to claim the Recovery Rebate Credit on your 2020 Tax Return.

Taxes and Benefits

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

Do I have to pay it back? No.

Will my federal benefits, like food stamps, be affected? No.

How will this affect my 2020 tax return? If you did not receive the full amount of stimulus payments that you were entitled to receive, you can fix it on your 2020 tax return (the one you’ll file this year, in 2021). There will be a worksheet on your tax return so that you can calculate what’s called the Recovery Rebate Credit. You will need to know the amounts of the first and second payments to fill out the worksheet.


This information is current as of January 6, 2021. I’ll update if and when more information is available.

Estimated reading time: 6 minutes

I’ve been asked a lot recently about section 230 – a phrase that’s been tossed around a lot with respect to stimulus checks.

Section 230 isn’t a tax provision (in fact, there isn’t even a section 230 in the Tax Code): it’s actually a telecommunications law. And I’m not a tech or intellectual property lawyer: my focus is tax. But in the spirit of trying to explain what section 230 has to do with stimulus checks – which are tax-related – I’m going to give you a quick summary. If you need a deeper dive, there’s some good stuff out there from tech lawyers.

What is Section 230?

Section 230 is part of a law – the Communications Decency Act (CDA of 1996) – which was passed in 1996. It provides liability protection for social media companies like Twitter and Facebook with respect to content posted by their users.

The meaty part is here:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

47 U.S. Code § 230

And you can find the full text of the law here.

What the law does, basically, is say that you can’t hold these companies – and other intermediaries like Internet Service Providers (ISPs) – legally responsible for things that other people post. There are some exceptions including conduct that is criminal, as well as copyright and other intellectual property, but the idea is that you – not the platform – should be responsible for your conduct, not Twitter or Facebook. Without section 230, companies might be so scared of being sued that they would either have to monitor everything posted all of the time – or they might just throw in the towel and decide not to provide the service at all.

Why Does Section 230 Exist?

The history of the bill dates backs to a 1995 court ruling against the online service, Prodigy. Prodigy isn’t around anymore, but back in the day, it was a top online service platform, along with CompuServe – another blast from the past. In 1994, an anonymous user created a post accusing Stratton Oakmont (a securities firm founded by Danny Porush, Brian Blake, and Jordan Belfort – if that last name rings a bell, you’ve likely seen Wolf Of Wall Street) of fraud. Stratton Oakmont sued the anonymous user and Prodigy for defamation. They won, with the court holding that since Prodigy did some moderation, it should be treated as a publisher. The case was Stratton Oakmont, Inc. v. Prodigy Services Co., (N.Y. Sup. Ct. 1995).

(Fun fact: In 1996, Stratton Oakmont shut down – for fraud – after it was expelled from the National Association of Securities Dealers (NASD) because it posed “an ongoing risk to the investing public.” A few years later, Porush and Belfort went to prison on securities fraud and money laundering charges.)

In 1996, section 230 was signed into law to rebut the presumption under Stratton Oakmont that companies should be treated as a publisher under the law. Now, if tech companies moderate some material – like keeping adult content away from children – they are protected from liability for other user content. In other words, if Facebook takes down sexually explicit content, I can’t use that as a justification to sue Facebook because my brother called me a name online. And, in the same vein, a restaurant can’t sue Facebook because it got a bad review from a customer.

Not everyone is a fan of section 230, including the President.

Why Does The President Want To Repeal Section 230?

In May of 2020, Twitter fact-checked some of the President’s tweets related to voting by mail. That resulted in a war of words with the President. On May 28, 2020, President Trump issued an Executive Order, targeted at tech companies, including Twitter, stating that, “Twitter now selectively decides to place a warning label on certain tweets in a manner that clearly reflects political bias.” He called for legislation to fix what he saw as a problem, specifically calling for a repeal of section 230, but Congress did not act.

The Stimulus/Spending/Extenders Bill

So what does this have to do with taxes? Remember the stimulus/spending/extenders bill? That bill passed the House and Senate and landed on the President’s desk, where he signed it – but only after pausing a few days to insist on some changes, including higher stimulus checks ($2,000 per person) and elimination of what he deemed wasteful spending.

When the President signed the bill into law, he said he was doing so with the understanding that the Senate would consider three things:

The Senate will start the process for a vote that increases checks to $2,000, repeals Section 230, and starts an investigation into voter fraud.

President Trump statement, December 27, 2020

He specifically signaled for the repeal of section 230 after signing the bill into law – even though there’s no mention of section 230 in the stimulus/spending/extenders bill.

What About The NDAA And That Veto?

When the bill went back to Congress, Senate Majority Leader Mitch McConnell (R-KY) urged his colleagues to overturn the veto, saying, “For the brave men and women of the United States armed forces, failure is not an option. So when it is our turn in Congress to have their backs, failure is not an option here either. I urge my colleagues to support this legislation one more time.” The veto was quickly overridden with a House vote of 322-87 and a Senate vote of 81-13 on January 1, 2021.

McConnell Ties Checks To Section 230

However, a few days before the veto override vote, on December 29, 2020, Sen. McConnell had acted on section 230. He introduced a bill that would have done what the President asked: tie the increase in stimulus checks to $2,000 to the repeal of section 230. It was a combined, not a stand-alone, bill. McConnell’s bill would have also required a bipartisan commission to study the “integrity and administration” of the 2020 election.

You can read the text here. It was not seriously considered.

We Have A New Congress

So what comes next?

The new Congress – the 117th – has already been sworn in. Under the Constitution:

The Congress shall assemble at least once in every year, and such meeting shall begin at noon on the 3d day of January, unless they shall by law appoint a different day.

20th Amendment, section 2

That happened on schedule this year.

Any changes to existing laws, including a repeal of section 230 or increases to stimulus checks, must be taken up by the new Congress. Stay tuned.

The Internal Revenue Service (IRS) is emphasizing that no action is required by eligible taxpayers for the second round of Economic Impact Payments (EIPs, or stimulus checks). As noted earlier, initial direct deposit payments began arriving as early as last night for some and will continue into next week. Paper checks will begin to be mailed on Wednesday, December 30.

This second round of checks is part of the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, passed by Congress last week and signed into law by President Trump on Sunday night.

Some Americans may see the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of January 4, 2021. At least one bank has suggested that paper checks may be postdated. No matter whether payments are direct deposit or paper checks, they are automatic. There is no magic formula for determining the date that your check arrives. And, the IRS is reminding taxpayers not to contact their financial institutions or the IRS with payment timing questions.

Yes, Payments Are Automatic

Payments will be automatic for eligible taxpayers who filed a 2019 tax return, those who receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits as well as Supplemental Security Income (SSI) and Veterans Affairs beneficiaries who didn’t file a tax return. (If you’re in this group and you don’t receive a payment for any reason, you can claim your payment when you file a 2020 tax return.)

Payments will also be automatic for anyone who successfully registered for the first payment online at IRS.gov using the agency’s Non-Filers tool by November 21, 2020, or who submitted a simplified tax return that has been processed by the IRS.

Who Is Eligible?

Eligible individuals will receive checks of up to $600 for individuals ($1200 for married couples) and up to $600 for each qualifying child. 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).

As before, dependents who are 17 and older are not eligible for the child payment. This is important to understand because there had been some discussions about changing the eligibility for dependents: that did not happen.

You can find out more about phaseouts and eligibility here. Additional information is also available on the Internal Revenue Service (IRS) website at IRS.gov/EIP.

How Will You Get Paid?

As with the first round of stimulus checks, most folks will receive payment by direct deposit. Social Security and other beneficiaries who received the first round of stimulus checks via Direct Express will receive this second payment the same way.

If you didn’t receive your earlier stimulus payment by direct deposit, you will likely receive a check or, in some instances, a debit card. If you don’t receive a direct deposit by early January, watch the mail for either a paper check or a debit card.

That said, the IRS notes that the form of payment for the second stimulus check may be different than for the first stimulus check. Some people who received a paper check last time might receive a debit card this time, and some people who received a debit card last time may receive a paper check.

What About Those Debit Cards?

Watch the mail carefully! Last time, some taxpayers weren’t expecting them and accidentally tossed them in the trash.

If Treasury sends you a debit card, it will be issued by Treasury’s financial agent, MetaBank®, N.A. The card will be sent in a white envelope with the U.S. Department of the Treasury seal. The card has the VisaV name on the front of the Card and the issuing bank, MetaBank®, N.A. on the back of the card.

Information included with the card will explain that this is your Economic Impact Payment or stimulus payment. More information about these cards is available at EIPcard.com.

Will You Get Anything With Your Payment?

As before, you’ll receive an IRS notice, or letter, after you receive a payment showing the amount of the payment. Keep this for your tax records.

What If You Have Changed Your Address Or Bank Account?

The IRS will use the data already in its systems to send the new payments:

  • If your direct deposit information is on file, you will receive the payment that way.
  • If your direct deposit information is not on file, you will receive the payment as a check or debit card in the mail.

What If You’re A Non-Filer and Didn’t Register With IRS.gov?

If you’re eligible for a stimulus payment but DO NOT generally file a tax return and you DID NOT register with the using the Non-Filer tool, you won’t receive an automatic payment. You can still claim your payment when you file your 2020 federal income tax return.

What If You Didn’t Receive Your First Stimulus Check?

If you are an eligible individual and you did not receive a stimulus check earlier this year, you will be able to claim it when you file your 2020 taxes in 2021. This is also true if you do not receive your second stimulus check.

If you didn’t receive a check, the IRS urges you to review the eligibility criteria when you file your 2020 taxes; many people, including recent college graduates, may be eligible to claim it. The stimulus checks will be referred to as the Recovery Rebate Credit (RRC) on Form 1040 or Form 1040-SR. You can read more about the Form 1040 for 2020 – including where the RRC can be found – here.

“Throughout this challenging year, the IRS has worked around the clock to provide Economic Impact Payments and critical taxpayer services to the American people,” said IRS Commissioner Chuck Rettig. “We are working swiftly to distribute this second round of payments as quickly as possible. This work continues throughout the holidays and into the new year as we prepare for the upcoming filing season. We urge everyone to visit IRS.gov in the coming days for the latest information on these payments and for important information and assistance with filing their 2021 taxes.”

Can You Check The Status Of Your Payment?

As before, the IRS will make the status of first and second payments available on the Get My Payment tool, available in English and Spanish on IRS.gov. You’ll need to be patient: the tool currently offline because it’s being updated with new information. The IRS anticipates it will be available in a few days.

Once the tool is back online, you can check the status of your check. According to the IRS, the data is updated once per day, overnight, so there’s no need to check more often.

What If Congress Approves Bigger Stimulus Checks?

As for those ongoing discussions to boost the check totals to $2,000 per person? If additional legislation is passed, EIPs that have been issued will be topped up as quickly as possible.

Congress may still be debating the size of additional checks, but Treasury is already taking action to deliver a second round of Economic Impact Payments (EIPs, or stimulus checks). This second round of checks is part of the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, passed by Congress last week and signed into law by President Trump on Sunday night.

According to the Treasury Department, checks will begin to be direct deposited into accounts, arriving as early as tonight (Tuesday, December 29) for some. Direct deposit payments will continue into next week. 

Taxpayers expecting paper checks won’t have to wait as long as last time: paper checks will begin to be mailed tomorrow, Wednesday, December 30.  

“Treasury and the IRS are working with unprecedented speed to issue a second round of Economic Impact Payments to eligible Americans and their families,” said Secretary Steven T. Mnuchin. “These payments are an integral part of our commitment to providing vital additional economic relief to the American people during this unprecedented time.” 

Who Is Eligible?

Eligible individuals will receive checks of up to $600 for individuals ($1200 for married couples) and up to $600 for each qualifying child. 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).

You can find out more about phaseouts and eligibility here. Additional information is also available on the Internal Revenue Service (IRS) website at IRS.gov/EIP.

No Additional Action Needed

As before, you don’t have to take any action to receive your checks: this second round of payments will be distributed automatically. 

What Comes Next?

Later this week, you can check on the status of your payment on the IRS website at IRS.gov/GetMyPayment

As for those ongoing discussions to boost the check totals to $2,000 per person? Treasury says that if additional legislation is passed, EIPs that have been issued will be topped up as quickly as possible.

Earlier this week, the President suggested that he might not sign the stimulus package/spending bill (you can read about what happened – and what it meant – here). However, tonight, the President did sign the bill into law.

The bill would do a few things, including:

  • Issue stimulus checks of $600 per person;
  • Extend unemployment benefits; and
  • Expand PPP, offering more loans, and allowing for deductibility.

You can read my summary and related bills here:

On Monday, the House still intends to introduce a bill to raise the stimulus checks to $2,000 per adult. The Senate has not indicated that it will take up the bill, though the President says that, “The Senate will start the process for a vote that increases checks to $2,000, repeals Section 230, and starts an investigation into voter fraud.”

You can read the entire White House statement here.

Stay tuned!

(Author’s Note: The bill passed in the House and Senate on December 21, 2020, after this piece originally appeared.)

Congress has finally agreed on a COVID relief package. It is the first significant stimulus action from Congress since the Coronavirus Aid, Relief, and Economic Security Act or the CARES Act was signed into law in March of 2020.

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 about what the bill looks like as of now:

When will I get my check? Checks are supposed to be produced quickly. Treasury Secretary Mnuchin indicated that, assuming the bill becomes law, checks would begin showing up in bank accounts as early as next week.

How big will my check be? Checks will be $600 per person – or $1,200 for married couples filing jointly – and an additional $600 per child.

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.

Wait, does that mean that they did not put in a dependent fix? Yes, that’s exactly the case. For purposes of getting the $600 per child, the law uses the same definition for a child as you’d use for the child tax credit. The sticking point for most parents for this purpose was the age: the child must be under age 17 at the end of the tax year. With the first round of checks, that meant that taxpayers were not entitled to receive the $600 additional payment for a child above the age of 16, even if they lived with you, ate your food, spent your money, and slept in your house. A change was included in earlier proposals to allow taxpayers with qualifying dependents (no matter their age) to receive checks, but that did not make it into the final bill. In other words, children over the age of 17 do not qualify as a dependent for purposes of stimulus checks.

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 it on line 8b of your 2019 Form 1040.

Wait, how does a phaseout work? Phaseout means that the benefit goes down as income goes up. It’s a 5% drop which means that 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 $595 ($600-$5). If you are a single filer earning $85,000, your check will be $100 ($600-$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 $87,000 as a single filer, $174,000 as a married couple filing jointly, or $124,500 for heads of household.

Does the phaseout apply to the dependent portion, too? Yes.

Why 2019? Just as in the CARES Act, it’s treated as an advance credit for 2020, but to get payments out quickly, the IRS will rely on 2019 tax returns.

What if I make less in 2020 than in 2019? Your check is determined by your 2020 income, but will be based on your 2019 tax returns. If you are entitled to more money, you can claim a credit on your 2020 federal income tax return for the difference (just as before).

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

But I heard something about ITINs? Yes. You still need a valid SSN to get a check. However, if you are married to someone with an ITIN and you file jointly, this will not disqualify you from getting a check. Additionally, if you are a married taxpayer filing jointly and at least one of you has a valid SSN, you will receive a check for your dependent. This is different from the CARES Act.

What about decedents? After the fiasco of the last set of stimulus checks, Congress made a point to include language about decedents in this bill. Anyone who dies on or before January 1, 2020, is treated “as if the valid identification number of such person was not included on the return of tax for such taxable year.” That means no money for decedents – and if the decedent appears on a joint return, the amount is reduced accordingly.

So how does this work? Do I need to file anything to get my check? Just as before, the checks are advances of credits for 2020. It will not affect your “normal” refund in 2020, nor how much you owe – it’s the same as before. But since we haven’t filed for 2020 yet, the IRS will “advance” your check based on your 2019 tax return.

What if I didn’t file a 2019 tax return? Thankfully, this time the language is very specific in allowing non-filers who receive benefits from Social Security Administration, Railroad Retirement Board, and the Department of Veterans Affairs to receive automatic payments based on information already in the system. 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. Treasury is otherwise empowered to use whatever means it deems efficient to get payments out so I expect to see another portal on IRS.gov.

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.

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 am expecting a refund for the 2019 or 2020 tax year? Your 2019 or 2020 refund will not be affected by the stimulus check.

Is my check taxable? No. As before, this is not taxable income.

What if I’m currently receiving government benefits? Or I don’t have any income? You are eligible for a check even if you receive government benefits and even if you don’t have any income.

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. There are no offset provisions.

What if my check is normally seized for child support? Unlike the CARES Act, there is no offset for child support either.

Really, no seizures? There isn’t supposed to be. The bill says “no applicable payment shall be subject to execution, levy, attachment, garnishment, or other legal process, or the operation of any bankruptcy or insolvency law.”

But how will my creditors know to leave these payments alone? Under the CARES Act, once payments hit bank accounts, they could be subject to seizures and garnishment to satisfy existing liabilities. Now, payments are to be coded in an obvious manner so that banks would not allow payments to be seized to satisfy certain legal obligations.

This is a done deal, right? Yes.

So no changes? I didn’t say that. This is, after all, 2020.

Not that I don’t trust you, but where can I find this in writing? It’s still a bill, not a law, but you can find the details in the House version here (downloads as PDF). But before you click, it’s over 5,000 pages long (yes, really). I’ll replace it with the enrolled version after the vote.

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