Agreement reached early on Wednesday will give money to most Americans, small-business loans and help for hard-hit industries.

Senate plan would send $1,200 checks to many, including Social Security recipients

The Senate voted unanimously late Wednesday (March 26th) night to approve a $2 trillion economic stimulus package that would send most Americans checks of up to $1,200, as a way to put money directly in the pockets of families struggling to manage the economic fallout of the coronavirus pandemic. Although the law hasn’t been finalized quite yet, it sure looks like Uncle Sam is going to be sending you a check sometime soon under a bill passed by the U.S. Senate. The Trump administration and Senate leaders worked out a plan to flood the U.S. economy with cash and provide relief for Americans who are taking a financial hit. One way to do this is to send us all direct payments from the government’s coffers.

The coronavirus stimulus package, known as the CARES Act, is working its way through Congress. The legislation still needs to be passed by the House of Representatives and signed by the president. The plan is for individuals to get up to $1,200 and married couples to get up to $2,400, plus an additional $500 for each child. The size of a check would diminish gradually for those whose income is above $75,000, while individuals earning more than $99,000 and couples earning more than $198,000 will not be getting any checks. The checks will be based on a household or individual’s 2018 tax return unless they filed their 2019 tax return, in which case it will be based of their 2019 return

The Senate bill does not set a date for when the checks would start to go out, saying only that the Treasury secretary would send the payments “as rapidly as possible.” The money could be sent either by mail or direct deposit. However, even if you don’t get a check now, you won’t lose out on the money—you’ll just have to wait until next year to get it. The way the law is written, the checks that will be sent now are just advanced payments of a new refundable tax credit for the 2020 tax year. So, if you don’t get a stimulus payment in 2020, you can claim it next year as a refund or reduction of the tax you owe if you file a 2020 tax return by April 15, 2021.

How much will the stimulus check be?

The size of the check would decrease based on income for individuals who earned more than $75,000 based on their tax return for last year (or their 2018 return if they have not filed yet). The rebate check for individuals would shrink by $5 for every $100 earned over $75,000. For couples who filed jointly, the reduction would start once they earn more than $150,000; for heads of household, at $112,500. Individuals who earned more than $99,000 and couples who earned more than $198,000 jointly would not receive checks. The check you receive is just an advanced payment of a tax credit for the 2020 tax year. It won’t be included in your taxable income.

According to the legislation, people who do not receive Social Security benefits and also do not typically file taxes because their income is very low will need to file a 2019 tax return in order to receive a stimulus check. President Trump has said that he wants checks to be delivered within a couple of weeks. That may be a bit too ambitious, though. The law instructs the IRS to send payments “as rapidly as possible.” But remember, the IRS is short-staffed right now thanks to the coronavirus pandemic. Back in 2008, when similar stimulus payments were issued, it took a couple of months for a fully-staff IRS to get checks in the mail.

One advantage the IRS has now, though, is the fact that most taxpayers have refunds directly deposited into their bank accounts now. That means the tax agency already has bank account numbers and bank routing numbers for millions of Americans. With that information in hand, the IRS can make electronic payments to a lot of people. This method of payment takes far less time than printing and mailing a paper check. The IRS will attempt to make payments electronically for anyone who authorized the direct deposit of a refund into their bank account at any point after 2017. If a direct deposit is rejected (e.g., if the bank account information is incorrect), the IRS will receive a rejection notice. At that point, the payment will be converted to a paper check and mailed to you.

Social Security recipients eligible

Some entities have worked to ensure that individuals who are collecting Social Security benefits for retirement, disability or Supplemental Security Income will be eligible for the stimulus checks, based on their tax returns or Social Security Administration data. AARP successfully fought to guarantee that low-income Social Security recipients would receive the full $1,200 check, not $600 as originally proposed.

If you are receiving Social Security benefits but didn’t file taxes in 2018 or 2019, you would be eligible to receive a stimulus check without a tax return based on data available to the IRS from your annual Social Security benefits statement. The government would send you a check using the information from your Form SSA-1099 Social Security Benefit Statement. You would not have to file a 2019 tax return to get a stimulus check.

For those with an IRA or a 401K

The CARES Act is also expected to waive required minimum distributions (RMDs) from retirement savings accounts for 2020, granting a reprieve for retirees age 70½ and older who might otherwise be required to sell low and take distributions just when the stock market has nosedived in recent weeks. The bill also allows people younger than 59½ to take an early distribution, up to $100,000, from a traditional IRA to pay for a coronavirus-related hardship, such as a job loss. The early distribution is penalty-free, though not necessarily tax-free. The tax bill can be avoided if the money is returned to the IRA in three years; if not, the taxes can be spread out over three years beginning in 2020. Distributions are taxed as ordinary income. With the RMD waiver, retirees who can afford to skip their 2020 distribution can now leave that money an extra year in an individual retirement account or a defined contribution employer’s savings plan, such as a 401(k) or 403(b), to recover without penalty. “That’s a huge relief for people who would otherwise be taxed on a value that has vanished,” says Ed Slott, founder of IRAhelp.com.