The U.S. Capitol building stands in Washington, D.C., U.S., on Saturday, May 30, 2020.
Stefani Reynolds/Bloomberg
This article originally appeared on MarketWatch.
The second round of direct checks authorized in the almost $900 billion coronavirus relief package are not a carbon copy of the first checks, starting with the halved, $600 payout size.
But many rules about stimulus checks 2.0 remain the same—and that means some theories about the government money that were untrue in the spring are just as untrue now.
Those are canards like some supposed obligation to pay back the money (wrong) or the capacity of some random cold-caller to get your money quicker (that’s a scam).
Federal regulators are already trying to prevent possible confusion. Congress passed the relief bill on Monday. President Donald Trump gave into his misgivings over the relatively modest sign of the stimulus, among other concerns, and on Sunday signed the pandemic-aid bill, averting a government shutdown in the process.
But the Federal Trade Commission put out a reminder on Tuesday that nobody will ever call you asking for money to quicken your access to the cash.
At the same time, the new set of stimulus checks do have some new rules for certain scenarios, like for people who are behind on child support or married to a non-citizen.
Treasury Secretary Steven Mnuchin said Monday these economic impact payments could start arriving in bank accounts next week.
Before that money hits your bank account, here’s a brush-up on old myths to ignore and new ones to avoid.
‘I’ll have to pay back this money‘
“No, you do not. It’s yours to keep,” said Lauren Saunders, associate director of the National Consumer Law Center.
Some of the bill summaries note the stimulus is an advance on your 2020 tax credit, but consumers shouldn’t think of the credit like an advance that’s due back later.
The income thresholds are the same, supplying the full payment—$600 per adult and $600 per qualifying child—to individuals with adjusted gross incomes below $75,000 per year and married couples filing jointly with adjusted gross incomes under $150,000 per year.
The Internal Revenue Service will look at a household’s 2019 returns to determine eligibility. (These were the ones people had to file by July 15, or Oct. 15 if they applied for an extension.)
The payments also diminish at the same rate for people making above the income threshold ($5 for every $100 on top of the threshold.).
But the payments gradually come to a halt at a lower income level this time around.
That’s because there’s less money per check, so it runs out sooner when using the same phase-out formula as before. Now, the payments end completely for single filers making $87,000 per year and above, and it ends for married couples worth $174,000 per year and above.
With the $1,200 checks, the payments ended at annual incomes of $99,000 for individuals and $198,000 for couples.
‘The stimulus check is taxable income‘
Again, no. The stimulus check you receive will not factor into your income-tax liability. That’s a point the House Ways and Means Committee noted in its rundown Monday on the new round of checks.
And because stimulus checks don’t count as taxable income, they don’t influence, offset or factor into the size of your refund.
While stimulus checks don’t count as taxable income, unemployment benefit money does count when the IRS tallies up a person’s income-tax bill, according to April Walker, lead manager for tax practice & ethics at the American Institute of Certified Public Accountants.
The new relief package authorized supplemental $300 weekly unemployment insurance going into mid-March.
One peril is a nasty tax bill waiting for people who didn’t know to withhold money for income tax when receiving their weekly payouts, experts say.
Thirty-seven percent of people didn’t know jobless benefits were taxable income, according to a June survey from Jackson Hewitt, the national tax preparation chain. Just over half of the 1,000 people surveyed (51%) didn’t know they had to ask for withholdings on their benefits.
‘My stimulus check will eat into my IRS refund’
Nope. The stimulus check you receive now won’t eat into your refund later. It also won’t get chipped away with a default on student loans, back taxes or others debts, Saunders said.
When the first stimulus checks hit accounts, the money was supposed to help families feed themselves, but with an initial lack of protections, the money “actually fed some debt collectors. This time, debt collectors will not be able to garnish payment,” Saunders said.
Though there were all sorts of financial obligations and delinquencies barred from dipping into stimulus checks, one exception was past debts on owed child support.
In the second round of stimulus checks, people behind on child support will not have those debts skimmed off the top. “Some of those debts were very old,” and the children supposed to be supported had grown up and gone on with their lives, Saunders said.
‘I can speed up the payment process‘
For many people who are hurting and feeling like they are trying to financially survive day to day, the money can’t come soon enough. But don’t let that push you into scam.
Government officials will never call you, text you or hit you up on social media offering to get you your stimulus money in exchange for money upfront, the Federal Trade Commission reminded consumers Tuesday. Anyone who makes that kind of offer is trying to con you, the agency said.
“There’s no such thing as getting your money early, or faster. Anyone who says they can hook you up now (or soon) is both lying and a scammer,” the consumer protection agency added.
In general, government imposter have cost consumers more than $5 million, according to an FTC database tracking the consumer complaints its received during the pandemic.
After the bill is signed, the IRS will start issuing payments early next week and into January 2021, according to the House Ways and Means Committee. “When available, electronic direct deposit will be used in place of mailing a paper check,” the committee added.
‘It’s now or never to get the stimulus’
Not necessarily. Remember, the direct payments are technically an advance credit on the taxes you will file early next year for your 2020 earnings. If a person’s 2019 earnings surpassed the income caps but then they had a rough 2020, they can get the stimulus payment after filing their taxes. If someone still earned over the income caps, they still will not receive a check
The IRS’s 1040 for the upcoming tax season will include a line where taxpayers can claim their recovery rebate credit. The IRS released the revamped 1040 earlier this month.
People who did not file taxes—likely because they made too little money—had until Nov. 21 to submit their bank account information via the Non-Filer Portal and get their stimulus check this year. Saunders noted that people who didn’t make this deadline can still get their first stimulus check and the upcoming $600 check by filing an income tax return next year.
There’s one catch on getting this year’s direct checks during next year’s tax season. The amounts will be lumped into a taxpayer’s general income tax refund, the Ways and Means Committee noted. Because of that, the money “will be subject to the garnishment and offset rules that generally apply to federal income tax refunds.”
The IRS will reduce refunds on obligations such as past-due child support, debts owed to other federal government agencies and state income tax bills.
‘My immigration status will interfere with stimulus’
Not necessarily. Like the first round of stimulus checks, the second round goes to people with Social Security numbers. In the specific context of these direct checks, that’s U.S. citizens and green card holders, according to Allen Orr, president-elect of the American Immigration Lawyers Association.
But in the Cares Cct, citizens and Green Card holders married to spouses who were not documented did not get the $1,200 stimulus check, nor did they get the $500 apiece for their citizen children. The decision launched lawsuits from people who said they were being deprived of badly-needed money just because of who they happened to love and marry.
The new bill addresses the issue of “mixed status” marriages. Now, the Social Security card holder will get the $600 direct payment, as will any children who have a Social Security number, Orr said.
The bill also has a retroactivity clause. That means the Social Security card holder who previously missed out on the $1,200 payment and eligible children who missed out on $500 will be eligible for it, according to Orr.
The provision was an attempt to right a past wrong, Orr said.
Last week, Sen. Marco Rubio, a Republican from Florida, made the same point. “Fixing the provision that denied some eligible American citizens from receiving a federal stimulus check under the Cares Act was an oversight that needed correction,” he said in a statement. “No American should have been blocked from receiving federal assistance during a global pandemic because of who they married.”
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