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What Is Stimulus Check & What You Need To Know

By June 17, 2022June 24th, 2022No Comments
stimilus check

What exactly is meant by a “Stimulus Check”?

A stimulus check is a check that the government sends to taxpaying customers to encourage spending. Checks are sent to customers to provide more cash to spend and stimulate the economy. Expenditure by individuals is a crucial element of a robust economy; however, consumer spending tends to decrease when there is economic unpredictability. The government will distribute checks as a stimulus to maintain a positive attitude for consumers and stimulate expenditure.

How does it work?

In response to COVID-19, the United States government distributed what is known as stimulus checks, which are essentially direct payments sent to American households. During the epidemic, there have been three separate checks distributed as a kind of stimulus:

The first check was made possible due to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). It offered up to $1,200 for each qualifying adult and $500 for each eligible dependent kid.

An extra check for the stimulus package for up to $600 per qualified adult and the dependent kid was given the green light in December 2020.

On March 11, 2021, the American Rescue and Reinvestment Plan Act made available a third stimulus check, which may be worth up to $1,400 for each adult and dependant.

Who receives a cheque from the stimulus package?

Checks in the amount of the stimulus package are being made available to qualified United States citizens with Social Security numbers. Nevertheless, the qualifying requirements are different for each check.

Any person identified as a dependant could not get their cheque for the first two installments. On the other hand, anyone who claimed dependents under the age of 17 was eligible to receive payments on their behalf. The prohibition on dependents receiving their checks under the third check remains in effect. On the other hand, those who claim dependents are now eligible to receive payments not just for adult dependents but also for dependent children older than 17 years old.

There is also a maximum allowable income. Single taxpayers who submit their taxes and have an annual income of less than $75,000 can get all three payments in full. Individuals who are the primary breadwinners in their households and have a yearly income of less than $112,500 and married couples who file jointly and have an annual income of less than $150,000 are both eligible. The phase-out regulations, which determine the income threshold over which high earners are no longer eligible for payments, vary from one kind of payment to another, as shown in more detail below.

When determining income and eligibility for the first two checks, the IRS used information from tax returns for either 2018 or 2019, depending on which year was more recent. To determine income and eligibility for the third payment, it will utilize information from tax returns for 2019 or 2020. The agency gathered information from the Social Security Administration and the Veterans Administration to pay those who get benefits but don’t submit tax returns. In addition, it built a web-based tool that non-filers may use to obtain their refunds.

Where can I look up the status of my stimulus check?

The Internal Revenue Service has established a webpage via which you may monitor the progress of your stimulus payment.

Get My Payment is no longer updated with new information for the first or second stimulus check. On the other hand, you may use it to verify the progress of your third check at any time.

  • Suppose your payment has already been processed. The Internal Revenue Service will provide details on its status, such as whether or not it has been sent, the date it was issued, and whether or not the money will be deposited immediately or mailed.
  • If your status indicates that “Payment Is Not Available,” Either the Internal Revenue Service has not yet processed your payment, or you do not qualify to receive one.
  • If it says “Need More Information,” then it means that. The Internal Revenue Service received your cheque after a delivery attempt, but it was returned to them. If you want the IRS to get your money, you must provide them with your bank information.

You would need to submit a tax return for 2020 to get the payment if you did not receive any of your first or second checks.

What will the amount of my cheque for the stimulus be?

Your family size and income level both play a role in determining how much of a stimulus check you will get.

The first check for the stimulus program had a maximum value of $1,200 for each qualified adult and $500 for each dependent kid under 17. Adults living alone were eligible to receive up to $1,200. Up to $2,400 was awarded to married couples without children. Up to $3,400 was awarded to married couples with two children when they qualified for the program.

Your check amount was decreased at a rate of $5 for every additional $100 earned if your income was over $75,000 if you filed as a single person, $112,500 if you filed as the head of your household, or $150,000 if you filed as a married couple filing jointly. If you filed as a single person and earned $76,000, the government would take $50 less out of your check.

Those who filed as single and had earnings of more than $99,000, those who filed as heads of household had incomes of more than $136,500, and married couples who filed jointly had revenues of more than $198,000 were no longer eligible for their payments. Despite this, some were still eligible for dependant benefits. For example, a married couple filing jointly with two children and a combined income of $199,000 would qualify for $950 of the $1,000 in dependent payments but would forfeit their benefits totaling $2,400.

The second check was for $600 and was given to each eligible adult and child dependant who qualified. The regulations for the phase-out continued to function in the same manner. Nevertheless, because the check was for a lesser amount, eligibility was wholly eliminated at a lower income criterion. No payment was made to individuals whose annual income was more than $87,000. Neither did heads of household earn more than 124,500 dollars unless those individuals also got some kind of dependant assistance. And married couples filing jointly were no longer eligible for their contributions after their income reached $174,000.

The final check is $1,400, which will be distributed to each qualifying adult and eligible dependent (including adult dependents). However, the regulations for the phase-out operate differently. Regardless of the number of dependents the individual has, they will not get any payment if their income is over the thresholds of $80,000 for those filing as singles, $120,000 for those filing as heads of household, and $160,000 for those filing as married couples filing jointly.

When will cheques for the stimulus package be issued?

The government of the United States has distributed three separate stimulus cheques. Most funds from the first two cheques have been dispersed to recipients. On the weekend of March 13, 2021, the Internal Revenue Service (IRS) started issuing the third payment. Prices for the third check will continue through April.

When can I anticipate receiving the following payment for my stimulus?

The first two coronavirus stimulus checks have been disseminated, and the third one is now being developed. You must submit a tax return to obtain the additional cash if you did not get the entire amount of stimulus monies owed.

As vaccines become more widespread, limits on locking down schools are loosened, and legislators shift their attention to other issues, it is very improbable that a fourth check will be approved.

When may we anticipate the next check of the stimulus?

The third check for the stimulus package was approved via a procedure known as “budget reconciliation.” This made it possible for Democrats to pass the legislation with just a simple majority vote in the Senate. The measure did not get the backing of any Republicans.

The number of times reconciliation may be utilized capped at a particular time. Republicans have made it evident that they have no interest in giving extra COVID assistance, while Democrats are now concentrating their efforts on other matters. As a result, it is very improbable that a fourth check for the stimulus package will be allowed. This is particularly true as states begin to relax their lockdowns and more people are vaccinated.

Where can I put my cheque from the stimulus package?

If you need the checks from the stimulus package to pay payments that are due right away, this should be your priority. You have the option of investing your stimulus cheque if you do not want the funds right now. To do it, you may choose between a few different approaches.

accounts with a high rate of return on savings

If you may need the money soon or want to strengthen your emergency fund, the best high-yield savings accounts are an excellent location to invest your stimulus cheques. These accounts provide competitive interest rates. The money is readily available, there is no danger involved, and the report may generate a decent return if invested in a high-yield savings account.

  • In the form of a certificate of deposit

Instead of establishing a high-yield savings account with your stimulus check, consider opening a certificate of deposit (CD). FDIC covers CDs like savings accounts. You must lock up your money for a while to achieve the best CD rates.

  • Brokerage

Using a brokerage gives you access to various investment opportunities, such as exchange-traded funds (ETFs), equities, and mutual funds. If you invest with one of the finest online stock brokers, you have the opportunity to make more significant returns on your investments.

Be aware, however, that investments in the stock market may both increase and decrease in value, so there is a chance that you might end up losing money. This is unlikely the best choice for you if you need it within the next two to five years. Investing for a shorter period exposes one to a higher level of risk than investing for a more extended period.

  • Accounts on the money market

Another alternative is to use the money from your stimulus cheque to open a money market. Money markets are similar to savings accounts; however, unlike savings accounts, you will often have faster access to your funds by using a debit card and cheques. There’s a possibility that the best money market rates are a tick or two below the interest rates on savings accounts. You will have to make this sacrifice in exchange for having more straightforward access to your money. On the other hand, much like savings accounts and certificates of deposit, they are protected by the FDIC.

An Explanation of the Stimulus Check

A cheque as part of the stimulus package will be paid out to taxpayers, or an equal tax credit will be issued. In most cases, those who owe money for their taxes will notice that the checks are immediately added to the total amount they are still responsible for paying.

It is a sort of fiscal policy, which implies that it is a policy that the government employs to attempt to alter the economic circumstances of a nation. Stimulus checks are an example of this type of policy.

Budgetary Controls

A nation’s prevailing economic circumstances may be influenced by a country’s fiscal policy, which refers to the spending and taxing policies implemented by the government. In contrast to monetary policy, which is connected with a nation’s central bank, fiscal policy has nothing to do with that institution. Instead, it is a policy that the government has decided to implement. The following are some of how the government makes use of fiscal policy:

Altering the level of funding that the government allocates to initiatives

  • Altering the tax burden by either raising or lowering rates

If the economy is in danger of overheating or entering a recession, the government may have to take specific preventative steps, such as implementing a few different policies. To bring down the temperature of an economy that is running too hot, a government may choose to implement a contractionary fiscal strategy, which involves cutting down on expenditure by the government while simultaneously raising tax rates.

To combat the effects of a recession on the economy, a government may choose to implement an expansionary fiscal policy. This involves raising the level of expenditure by the government while simultaneously lowering tax rates.

To encourage more people to go out and spend money, tax cuts in the form of stimulus checks are sometimes used.

The influence that the Stimulus Checks Will Have

As was just indicated, a stimulus check may be seen as a reduction in the amount of money paid in taxes. The government may lower taxes, encouraging firms and people to spend more money and save more.

A stimulus check may encourage firms and people to invest or spend more during a recession by giving them the option to do so with their increased discretionary income. A greater level of consumption will lead to a rise in demand, which will cause firms to hire more individuals. Because there is a greater demand for labor, salaries will go up, which will, in turn, lead to a rise in spending, creating a virtuous cycle.

Checks on the Stimulus Program in Practice

During the Global Financial Crisis of 2008, the government of the United States issued stimulus payments. The checks were distributed to maintain an unemployment rate lower than 8%. Individuals who met the income requirements, which were at least $3,000 per year, were the recipients of the cheques.

In 2020, when COVID-19 broke out and caused a halt to numerous economic activities, the United States once again provided a stimulus check to consumer families.

Evaluation of the Effects of the Stimulus Checks

Several studies were conducted in 2008, concluding that the stimulus checks, in concert with other fiscal and monetary policy measures, successfully lowered the unemployment rate and raised GDP. Nevertheless, it was not possible to draw any firm conclusions about the proportion of the beneficial impact that may be ascribed to the checks themselves.

The checks are sent with the presumption that customers would use them for spending or that they will inspire consumers to spend more money overall. It is possible, however, that this may not always be the case. Consumers may choose to put the money away in savings or utilize it in a manner that will not immediately contribute to an increase in GDP or employment.

In addition, the government that hands out checks as part of the stimulus package will have to pay a significant additional debt. For instance, in the United States, the COVID-19 stimulus cheque sent in 2020 was part of an economic assistance program totaling $2.2 trillion. Going ahead, it concerns governments with vast amounts of debt or unstable economies.

Taylor Day