Negotiators on Capitol Hill face mounting pressure to pass either another coronavirus economic relief package or a smaller bill that would send eligible Americans a second stimulus check worth as much as $1,200 as a way to stoke spending during the recession and help people make it through the pandemic. The need is acute in the US right now: Nearly 3.7 million people became unemployed in July, and as many as 40 million people are facing eviction.
Though stimulus package negotiations have not resumed after an exploratory phone call between House Speaker Nancy Pelosi and White House Chief of Staff Mark Meadows on Thursday, the way the first stimulus check was processed can give us an idea about how a second round of payments could be handled, including how it’s treated on your taxes and how to receive money if you don’t usually file with the IRS.
Still waiting for that first payment? Read on to learn some ways to tackle the problem and find out what happened, like using the free IRS tracking tool or filing a missing payment report. We update this story often as new information becomes available.
Will you be taxed on your stimulus check? What are your rights?
These rules apply to the first stimulus payments issued in March and could serve as a model for the second round of payments, if there is one.
The payment is not taxable: You won’t pay taxes next year on a stimulus payment you receive from the IRS in 2020. The IRS doesn’t consider it income and a payment you get in 2020 will not reduce your refund or increase the amount you owe when you file your 2020 tax return next year. You also won’t have to repay anything if you qualify for a lower amount in 2021.
Overdue debts: Under some circumstances with the first stimulus payment, banks and private creditors could seize your payment for outstanding debts. The current stimulus payment proposals would in most cases prohibit creditors and banks from seizing the payment to pay debts. Likewise, you are not required to hand the check over to facilities, like nursing homes and landlords, to cover expenses.
Overdue child support: With both the CARES Act and the proposed HEALS Act, you would not receive a check if you owed child support. Under the House of Representatives’ Heroes Act, which the Senate did not take up or veto, you would be eligible for a payment if you owed support.
In some cases, payments do need to be returned: The IRS said someone who died before receipt of the payment, a nonresident alien or those who are incarcerated do not qualify for a check. These payments need to be returned if received, the IRS said.
A payment does not affect other government benefits: Your stimulus check will also not count toward determining any other benefits you receive from the federal government.
Feel free to spend it: Once you receive your stimulus money, you can spend it (and the hope is that you will, to help keep the economy moving). If you receive your payment on a prepaid debit card, you can transfer the amount to your own account.
How will you get your payment: Direct deposit or by mail?
A little over 75 percent of the first round of stimulus payments went out as direct deposits to bank accounts, the IRS reported. Of the 159 million payments made by June, 120 million were issued as direct deposits, 35 million were sent by check and 4 million were sent in the form of a prepaid debit card (more about this below).
If you already have direct deposit set up with the government to receive your tax returns or other benefits, the IRS will use that information to send your check. A big advantage to using direct deposit is that you could be among the first to receive your payment. The first round of checks in April went to those who already had banking information on file with the IRS.
Read More: Stimulus check: Income limit, eligibility, fine print and how the first payment