Congress finally passed a much anticipated second stimulus package and the bill was signed by President Trump on December 27th. While this second stimulus package is less than what we saw in March’s $2 trillion deal this economic stimulus package is designed to bring relief to those experiencing the financial hardships caused by the continuation of the COVID-19 pandemic including businesses, hospitals, schools, families, and individuals.
If you received a stimulus check following the initial CARES Act last March, it’s likely you can expect to receive another stimulus check in the coming weeks. And for some families, changes made to this round of stimulus payments will offer more inclusion than before.
Below are some highlights of the bill’s coronavirus-related relief efforts that could affect you, your family, and your business in the near future.
Individual Stimulus Checks
Just as the first round of stimulus, taxpayers who qualify will receive a check up to $600 per person (couples will receive $1,200). In addition, families will receive $600 per child under the age of 17.
Important to note is that the initial amount paid will be based on a taxpayer’s 2019 income tax return (latest return that the IRS has on file), but it will ultimately be ‘trued up’ if a taxpayer is owed money based on their actual 2020 income. In other words, taxpayers will be given an estimated amount based on their 2019 incomes but could end up getting even more (albeit later) if their 2020 return shows they made less money than they made in the previous year.
How Does the Phase-Out Work?
Individuals who make under $75,000 and couples who make under $150,000 and head of households with a $112,500 income are eligible for the full stimulus check.
For taxpayers with higher income, the amount is reduced by $5 for each $100 above $75,000, or $150,000 for couples - up to $87,000 or $174,000. This means that individuals with an income higher than $87,000 are not eligible to receive a stimulus check and neither are joint filers with an income over $174,000.1
Are Noncitizens Eligible?
Back in March, the CARES Act did not allow families of mixed-status to receive a stimulus check. This refers to households in which a U.S. citizen is married to a noncitizen. In the new package, however, both the U.S. citizen and their noncitizen spouse are eligible to receive a stimulus check.2
What if the IRS Does Not Have My Direct Deposit Information?
The IRS has created an online portal, called Get My Payment, where individuals can check the status of their stimulus check and learn what information the government may still need in order to issue a check. According to the IRS, this portal will provide important information including your payment status, payment type and whether additional information (including bank account information) is required.
If I Usually Do Not File a Tax Return, How Can I Receive a Check?
Those who usually do not file a tax return, including low-income taxpayers, senior citizens and Social Security recipients, will need to file a simple tax return (but still will not owe tax) in order to receive their check. The IRS has created a special page dedicated to the Coronavirus and will be updating it with next steps on how to do this soon.
What Is the Difference Between a Stimulus Check and a Tax Credit?
The stimulus check is the same as a tax credit, and it is specifically an advanced refundable tax credit, meaning it is a refund allotted to you and is also sent in advance of the 2020 tax return.3 A refundable tax credit differs from a nonrefundable credit, which only applies to the amount of taxes you owe and is not available as a refund to you otherwise.3
Is the Stimulus Check Taxable?
Since the stimulus check is a tax credit, it is not income and therefore is not taxable.
Unemployment Benefits to Continue
Unemployment benefits as established in the original CARES Act are due to expire on December 31. With the newly passed act, those on unemployment can continue receiving an additional $300 in federal unemployment benefits for an additional 11 weeks.4
The CARES Act also established a pandemic unemployment assistant (PUA) program to offer unemployment benefits to those who have previously not been eligible - including those who have been furloughed by their employer, freelancers and gig workers (such as Uber or Lyft drivers).
This new act is set to extend the PUA program for an additional 11 weeks.4
Paycheck Protection Program & Small Business Loans
The Paycheck Protection Program (PPP) will get the boost it needs to continue operating in 2021; to the tune of around $284 billion. As a reminder, the PPP offers businesses under 500 people assistance in the form of forgivable loans that help cover payroll and other necessary operating expenses.4
A new provision not seen in the CARES Act, this package includes a “Save Our Stages Act,” which offers cultural centers, theaters and other live performance venues $15 billion in government assistance.4
An ongoing point of controversy for several months now, schools across the country have had to make a very tough decision, should they continue virtual learning or bring kids back for in-person classes? Money appointed to schools in the initial CARES Act largely went to increasing technology capabilities for virtual learning and emergency financial aid grants to college students.
Around $82 billion will be split between the Elementary and Secondary School Emergency Relief Fund and the Higher Education Emergency Relief Fund.4
COVID-19 Vaccination Distribution & Testing
The FDA approved two COVID-19 vaccines in December, and distribution has begun. Approximately $69 billion from the new stimulus package will go towards vaccination procurement and distribution, as well as statewide testing-and-tracing measures.4
The new stimulus bill has extended the CDC’s moratorium on rent evictions through the end of January. For the millions of Americans past-due on their rent payments, the stimulus package includes $25 billion in rental assistance for qualified families and individuals.4
Food Assistance Programs
Food assistance programs, like SNAP, will receive around $13 billion in federal assistance.4
Of note, President-elect Joseph R. Biden, Jr. is set to take office on January 20 and has already made it clear this round will not be the end of government assistance amidst the COVID-19 pandemic. He recently said, his economic package will be in the trillions of dollars. While we do not know what additional relief may be coming, it is possible the newly passed legislation could be enhanced and bring additional good news to you and your business.