10 Things to Know About the Second Round of Stimulus Payments
By Ashley Burnside
In late December, lawmakers passed a coronavirus relief package that provides essential economic relief for millions of workers and people with low incomes, though it falls short of the high levels of need. One component of the package is a second round of stimulus payments. Despite wide news coverage about these payments, many have questions about who’s eligible and how to receive the payments. These payments also have some different eligibility rules than those distributed earlier. Below are ten things to know about the second round of payments:
1. The payments will be $600 per qualifying adult ($1,200 for married taxpayers filing a joint return) and $600 per child under 17 years old. Children who are 17 years old and older as well as other dependents, such as those who are permanently disabled, are not eligible for the $600 payment. CLASP is disappointed that Congress failed to include the adult dependent population in the stimulus payments. You will not need to pay back the IRS because the payments are an advance against a new credit for tax year 2020. These payments will not affect eligibility for other tax credits.
2. You can’t receive the $600 payment if you can be claimed as someone else’s dependent. You can be claimed as someone else’s dependent based on your relationship to the filer, your age, whether you lived with your parents for more than half of the year, and whether you were financially independent for more than half of the year, among other factors. This will affect many full-time college students under age 24. However, it’s important to review the rules, since not all college students are dependents. Here are more details about whether or not a child qualifies as a dependent. People who were dependents in 2019, but not 2020, can claim both stimulus payments when they file their 2020 taxes.
3. You don’t need to have earned income to qualify. The full payment is available to those with little to no income. Even if you are making $0, you can still receive the full payment. The payments phase out at higher income levels, starting at $75,000 for single filers. The phase-out rates are the same between the first and second round of payments – $5 for every $100 that you made above the Adjusted Gross Income (AGI) limit – but because the payments are smaller, some people who received a partial payment in the first round won’t get one this time.
4. You must have a Social Security number to receive the payments, but mixed immigration-status families are now eligible. Unlike the first round of stimulus payments, as long as one adult in the household has a Social Security number, other members of the household with Social Security numbers can receive the payment. Mixed-status families who did not receive the first stimulus payment due to the previous restrictions on spouses of people filing with Individual Taxpayer Identification Numbers (ITINs) will now be eligible to get that payment retroactively when they file their taxes in spring 2021. However, filers with ITINs are still not eligible to receive the payment. And if both parents have ITINs, children with Social Security numbers will be left without a payment. This will prevent about a million children who are citizens from receiving the payments.
5. The IRS will use the information it already has on file from the first round of stimulus payments. The IRS will deliver payments to the same locations where it sent the first stimulus payments (mail or direct deposit). If you qualify for a higher payment based on your 2020 circumstances, such as your family size or income changing, you will have an opportunity to get that additional money as a Recovery Rebate Credit when you file your taxes in spring 2021, but you won’t owe money if you would have qualified for a smaller payment based on your 2020 income or family situation. Social Security recipients (both retirement and disability) will receive the payments automatically, as will Supplemental Security Income (SSI) recipients, railroad retirees, and recipients of veterans’ benefits, although they may need to fill out a form to claim dependents.
6. The payments will be automatically paid by direct deposit if you provided a bank account on your tax return. Checks will be mailed if there is no account provided. Those who have a direct deposit on file with the IRS will receive their payments faster than those getting a check by mail. This will create additional challenges for people without a permanent address. If you do not have an address on file with the IRS, you can provide an address and claim the stimulus payment when you file your taxes in spring 2021.
7. Like other tax refunds, these payments will not be counted toward eligibility for means-tested programs and will be disregarded as an asset for 12 months. This means the payments won’t jeopardize your participation in programs including Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and public housing. In addition, the rebate checks are not considered taxable income.
8. The payment can’t be intercepted for past-due taxes, student loans, Unemployment Insurance over-payments, or for child support that is owed. We applaud the change in this round—unlike the first round—that prevents payments from being intercepted for owed child support payments.
9. The IRS expects to start sending the payments by the end of December through the first two weeks of January. If you are eligible and don’t receive your payment, you can claim it when you file your taxes for 2020 in early 2021. The IRS usually begins to accept returns in late January. This year, the tax form will include a section for filers to claim the Recovery Rebate Credit. The IRS may also provide a form for people without taxable income.
10. The requirement to file taxes to receive the payment will be a barrier for many people. An estimated 12 million people had not filed for their stimulus checks by October 2020, in large part because they don’t traditionally file taxes and had to file a separate form in order to be eligible. This is especially true given that many Volunteer Income Tax Assistance (VITA) sites that offer help with preparing taxes are closed due to the coronavirus pandemic. Public education campaigns and free online resources (such as the IRS Free File program) will be vital for helping people access these payments, especially those who have not previously filed taxes and those making little to no income.