You’ve got questions about the new $2 trillion stimulus plan (“CARES Act”) passed by Congress and signed into law by the President on March 27, 2020?
We've got answers!
Here are some questions & answers that might be on your mind
Can you break this whole thing down for me in one or two sentences?
No. The stimulus bill is hundreds of pages long and very complex. Depending on your situation, it may impact you in any number of ways, nevertheless we will do our best to summarize important points here.
If your income is below certain levels, and you have a social security number, you should automatically qualify for a stimulus payment.
Do I need to do anything to make sure I get my stimulus payment?
If you filed a tax return for tax year 2018, or 2019, or you receive a Social Security pension, the IRS will automatically issue your stimulus payment. You do not need to “sign up” to get it. BEWARE OF SCAMS WHERE SOMEONE SAYS YOU NEED TO GIVE YOUR PERSONAL DATA. IDENTITY THIEVES AND OTHER CRIMINALS ARE TRYING TO USE THIS TO PERPETRATE SCAMS, BE CAREFUL!
How much will I get?
Payments are $1,200 for each individual taxpayer. So, if you file Married Filing Jointly, it’s $2,400. Plus $500 per child under age 17.
I heard I might not get the stimulus payment because my income is too high?
The stimulus payments have what’s called a “phase out” limit. Meaning that if your income goes above certain levels, your stimulus payment may be reduced or eliminated.
What “certain levels of income” are you talking about?
If you file Single with income over $75,000, Head of Household with income over $112,500, or Married Filing Jointly with income more than $150,000, your stimulus payment may be reduced or eliminated.
Here is a Stimulus Payment Calculator you can use to get an idea of the amount you should expect. Note that there are a few other factors not included in the calculator, but generally it’s pretty accurate.
Is this stimulus payment based on my “total income” or how exactly is “income” calculated?
The “phase out limits” are based on your Adjusted Gross Income (AGI). This is a specific number that appears on your 1040 tax return.
Do I need to file my 2019 tax return in order to get a stimulus payment?
No. As long as you filed a 2018 tax return, IRS will use the 2018 data to calculate and pay your stimulus payment amount.
Should I file a 2019 tax return, to increase my stimulus amount?
If you were above the “phase out” income limits mentioned above for 2018, and then had less income in 2019, or you added new child dependents in 2019, then yes, you should file your 2019 tax return right away, because filing that 2019 tax return may increase the amount of your stimulus payment.
IRS has stated that payments should start going out around April 6, 2020.
How will I get my payment?
If you already have direct deposit bank information on file with the IRS (from a previously filed tax return), IRS has stated that they will direct deposit the amount into your bank account.
If you don’t have a bank account on file with IRS from a previous tax return, they will mail your check to the last address on file on your tax return. That will take longer than direct deposit. Initial reports state that mailed checks may take up to four months, however that may change as IRS starts issuing payments.
What if I changed or closed my bank account? How can I avoid IRS direct depositing into an old bank account that’s no longer active?
IRS has said that you can contact them at 800-829-1040 to change your bank account info. We expect long wait times. If you can’t get the account corrected in time, the IRS will “bounce back” the payment if account is closed, and then issue paper check. You’ll have to follow up accordingly if this happens.
What can I do to update my bank account with IRS?
IRS has said that you can contact them at 800-829-1040 to change your bank account info. We expect long wait times. Or, if you haven’t filed 2019 tax return, you can file that now and update your account info.
What if I moved addresses? I’m concerned they could mail my stimulus payment to my old address?
You should file Form 8822, Change of Address, or file your 2019 tax return with an updated address ASAP in order to avoid mailing to the incorrect address.
I heard there’s a lot of stuff in the stimulus plan for business owners?
Indeed. We are still digging through all the details for our business tax clients and, if you are a business client, you should expect further info from us soon. The main three components for business owners are:
- Tax credits for retaining employees
- “Paycheck Protection Program” loans, and
- The “Economic Injury Disaster Loan” (EIDL) program.
If I am claimed as a dependent on someone else’s tax return, will I get a stimulus payment?
If I don’t have a Social Security number (for example, use an ITIN), will I get a stimulus payment?
No. A valid social is required.
If my spouse and kids have socials but I have an ITIN, will we get the stimulus payments based on my spouse and kids?
Our understanding as of now is that stimulus payments will be issued to anyone who has a Social, even if other family member(s) have ITIN(s). In this case, it should be $1,200 for each taxpayer with a Social, and then $500 for each child under 17 with a Social. We are still awaiting official guidance from IRS on this issue but as of now, that is what we expect.
Will we have to pay this money back?
Technically this is an “advance” payment of a tax year 2020 tax credit. Meaning that we will have to “report” whether or not you received the credit, and how much, as part of preparing your 2020 tax return.
This means that if you do not receive a stimulus payment now, you could still “pick it up” on your 2020 taxes. For example, if you didn’t file a 2018 or 2019 tax return, but then you file a 2020 tax return and IRS finds that you’re qualified for the stimulus payment, you’d have that added to your 2020 tax return.
The opposite scenario is also possible: let’s say your income goes higher in 2020, putting you in the “phase out” range for the stimulus, but you already got paid the stimulus. Would you have to pay it back? Our understanding as of now is that no, you would not have to pay it back, even if your income goes higher in 2020. Again, we are still awaiting 100% clear guidance from IRS on that, but this is what we expect as of now.
Do we have to pay taxes next year on the stimulus payment as if it’s income?
I owe money to IRS, or another agency (defaulted student loan, etc.), will I still get the stimulus payment?
IRS has announced that they will not use their “offset program” for this stimulus. Meaning that even if you owe IRS or another agency and normally your tax refund gets taken, you will still get this stimulus payment, as long as you meet the eligibility criteria described above. One exception would be if you owe back payments for child support, in that case don’t expect any stimulus payment.
How can I check on the status of my stimulus payment?
As of now, IRS has not offered any way to check on the status of your payment. If that changes, we will update this page accordingly. The IRS main customer service phone number is 800-829-1040 if you want to give that a try.
I heard this stimulus plan increased unemployment benefits a lot?
That is true.
What amount of unemployment will I get if I lose my job?
The maximum benefit depends on your state. In California, the max benefit is $450 per week. The new stimulus plan adds an extra $600 per week to that amount, for up to 12 weeks. Meaning new maximum benefit is $1,050 per week. Benefits are based on an “income replacement” model, so if you were earning less than certain amounts, you may not receive the maximum benefit.
Where would I apply for unemployment?
You apply with your state agency. In California, that’s the Employment Development Department. You can apply online here.
Can I apply for unemployment if I am self-employed? (Working on a 1099 basis, such as Uber driver, freelancer, etc.)
If I am self-employed, how will they calculate my income for purposes of paying unemployment? Will it go off my gross income, net income, how will that work?
From what we understand now, they will use this definition of income for self-employed people. Yes, it’s a bit complex.
Will I have to submit some kind of proof of my self-employment income to receive unemployment?
If I work part-time and lose my job, can I get unemployment?
If I was on unemployment before but then ran out of benefits, can I re-apply and get more benefits?
Will any unemployment payments I receive in 2020 be taxable income on my 2020 tax return?
Yes. Unemployment benefits are taxable income on the federal tax return. You should have the option to have taxes taken out of your benefits if you want to “cover” the tax during the year.
I heard I don’t have to pay my student loans right now. Is that true?
Generally speaking, for federally-backed student loans (the majority of student loans are federally-backed), you don’t have to pay again until September, 2020. However, you will need to verify directly with your loan company whether this is the case for your particular loan.
Will they still charge me interest on my student loan while I’m not paying it?
They are saying no. Again though, we advise you to verify this with your loan company.
I heard I don’t have to pay my mortgage right now. Is that true?
Several major mortgage companies have instituted a “hiatus” on payments. Make sure to verify with your lender before not making any mortgage payment!
I can’t pay my rent. Any help for me?
The stimulus bill puts a 120 day hold on all evictions IF the landlord has a mortgage backed by the federal government.
I have money in my retirement account, can I access it without paying a penalty?
We do not recommend withdrawing retirement plan funds if you can avoid it. Nevertheless, IRS has loosened early withdrawal penalties. The stimulus plan allows taxpayers to withdraw money from retirement accounts early without paying penalties, if the withdrawal is related to a COVID-19 crisis.
Keep in mind that, depending on the type of retirement account, you still need to pay income tax on the amount withdrawn (just not the extra early withdrawal penalty if it’s a COVID-19 emergency withdrawal).
Anything else I should know?
Plenty more contained in this 800+ page bill and we will continue to update this page as more info becomes available. If you’re feeling frisky, you can click here to read the actual bill itself.
For now, we just wanted to get out these most common questions right away so that you’re properly informed.