Cash for the holidays: 5 things to know about the new stimulus payments

0

The government is gearing up to send millions of Americans another round of economic stimulus payments. But this one won’t be exactly like the one from earlier this year. Here are five things to know about the new program:

It’s scaled back: The payments will be smaller this time around, as lawmakers try to keep down the cost of their latest coronavirus stimulus package (the payments alone will cost $164 billion, according to the official Joint Committee on Taxation). They max out at $600 for individuals earning less than $75,000, or $150,000 for those filing jointly. That’s half as much as the previous round of checks, though children will get a bump up to $600, from the previous $500. Lawmakers are keeping a rule from earlier this year that only dependents under the age of 17 are eligible (sorry, college students).

The IRS will determine most people’s income eligibility by looking at the tax returns they filed earlier this year. The agency also has a lot of information now about people who don’t have to file returns, after having to track them down as part of the previous payment program. For people whose circumstances have changed since they did their taxes — maybe they had a baby — they will have to clear that up when they do their taxes next year.

Tweaking the formula: Lawmakers are trying to avoid some of the controversies that came with the last round of payments. For one thing, they’re being a lot clearer about when dead people can get paid — money that would likely go to their survivors. The legislation stipulates that if someone was alive at any point during 2020 they can not only get this new payment, but they can also get the one from the previous round of payments as well. The last coronavirus measure was silent on the issue, which allowed the Trump administration to decide — and it had trouble determining how to proceed. The IRS initially determined the dead were eligible before being overruled by Treasury, which asked the public to return the payments.

The measure also stipulates that people who are U.S. citizens can get payments, even if they are married to an undocumented immigrant. That comes after a furor earlier this year over provisions in the last coronavirus package that essentially disqualified entire families from getting a check if some were U.S. citizens and some were not.

The legislation is silent though on whether prisoners should get payments. The IRS previously announced that the incarcerated were ineligible, a decision that is now being challenged in court.

How quickly? One of the big questions surrounding this batch of payments is how quickly they might be distributed, with some wondering if many might not go out until after President Donald Trump has left office — leaving a President Joe Biden to preside over (and perhaps enjoy credit for) them. It took the IRS about 15 days to begin sending checks after the last coronavirus stimulus package was signed into law, and the agency needed months to distribute more than 160 million payments. But this round should go much faster, since the IRS has already done this once this year.

Treasury Secretary Steven Mnuchin said Monday that the payments would begin being disbursed next week. “Just in time for the holidays,” he told CNBC. It’s unclear how long it will take to distribute them all. “It’s hard to say right now and we probably won’t know for a couple days,” said a Treasury official, speaking on condition of anonymity. The legislation actually dictates the payments must be made by Jan. 15. Trump’s last day in office is Jan. 20.

What about the tax-filing season? It begins later next month and it’s a potentially big complication. This is usually a busy time for the IRS, as it gets ready for taxpayers, and some say Congress is asking a lot of the agency to simultaneously implement a new round of payments. “It’s hardly an ideal time for this to arrive on the doorstep of the service,” said Mark Everson, a former IRS Commissioner, now vice chair of alliantgroup.

Not just that. There’s a lot of potential for confusion. The legislation says the payments need to go out by Jan. 15, but what if they don’t? What if it takes awhile for people to receive paper checks, for example? It’s conceivable that some people will do their taxes before they receive their payment and will instead claim it as a credit on their return — only to receive a payment later. It also seems easier and cheaper for most people to just claim the $600 credit when they do their taxes, instead of the government going through the trouble of sending payments to half the country.

A Treasury official says IRS systems could catch those sorts of double payments. And the agency doesn’t want to wait until the next filing season to get the money out. “The filing season won’t open until the end of January so no refunds would go out until mid-February, which is two months away,” the official said. “The primary reason for doing it now is to get money into the pockets of people who need it as soon as possible.”

Plus, lawmakers want credit from voters for the payments — and they’re harder to notice if someone just takes them by filling out a line on a tax form.

‘No’ to no double dipping: Some Republicans wanted to prevent jobless people from also getting the stimulus payments, saying they shouldn’t get a double benefit. That would not only have been controversial. It would also have been difficult to implement, because the IRS doesn’t have information about people’s employment status. And jobless benefits are handled at the state level, which would have required a lot of coordination between the IRS and state governments. Lawmakers dropped the idea during negotiations.

View original post