In this article, we will discuss the Stimulus Check and who is eligible for this. This complete guide will be beneficial for you. So, keep reading to be well informed.
What Is a Stimulus Check?
A stimulus check is a check sent to a taxpayer by the U.S. government. Stimulus checks are meant to stimulate the economy by giving consumers some spending money. Taxpayers receive this money because it’s intended to increase consumption and drive revenue at retailers and manufacturers, spurring the economy.
A stimulus check can be part of a larger federal stimulus package created to support the economy, which was the case with the stimulus payments that were part of the CARES Act in 2020 and the American Rescue Plan in 2021.
Learning a Stimulus Check
Stimulus checks have been mailed out to U.S. taxpayers on several occasions. These checks differ in value according to the taxpayer’s filing status. Joint taxpayers generally get twice as much as those filing singly. In some instances, unpaid back taxes saw their stimulus checks automatically applied to their outstanding balance.
Research posted on the National Bureau of Economic Research (NBER) found that the means of delivery of fiscal stimulus makes a difference to the overall spending patterns of consumers. They were implementing fiscal stimulus by sending checks increased consumer spending activity. However, applying tax credits equal to the amount of money given in a stimulus check did not result in an equivalent increase in consumer spending activity.
Examples of Stimulus Checks
Financial Crisis of 2008
One example of the use of stimulus checks happened when the U.S. economy entered a severe recession after the financial crisis of 2008. The incoming Obama administration estimated that sending out checks would prevent unemployment rates from going beyond 8%.2
The payments were part of the Economic Stimulus Act of 2008, which was enacted during the administration of President George W. Bush. The government sent out checks to those with at least $3,000 in qualifying income from, or in combination with, Social Security benefits, Veterans Affairs benefits, Railroad Retirement benefits, and earned income. The checks amounted to: 3
- Eligible individuals: between $300 and $600
- Married taxpayers filing joint returns: between $600 and $1,200
- With eligible children: an additional $300 for each qualifying child
Coronavirus Pandemic
In March 2020, the U.S. government approved a bill to send American’s stimulus payments to provide relief for economic hardships caused by the coronavirus pandemic. Among other provisions, the CARES Act specified tax rebates of $1,200 per adult and $500 per qualifying child. The rebate phases out for incomes above $75,000 per year for individuals and $150,000 for joint filers.4
The second round of $600 stimulus checks went out in December 2020.5 Then, in March 2021, the American Rescue Plan Act was signed. It included direct stimulus payments of $1,400 to people making $75,000 or less per year.
How Much Could I Receive?
The most recent stimulus payment, which began rolling out in March 2021, expands the amount you can receive to $1,400 per single individual or $2,800 for a married couple filing jointly. It also expands the payments and eligibility for dependents to include those under the age of 19, college students under the age of 24, and adults with disabilities.
The amount you’re eligible to receive is calculated based on your income on your 2019 tax return unless you had already filed your 2020 tax return before payments were sent. If your income dropped in 2020 due to the pandemic and you qualify for a larger stimulus payment, the IRS will issue a second adjusted payment once the 2020 tax returns are processed.
Eligibility of Stimulus Check
In addition to the income limits, individuals must also meet specific citizenship and identification requirements. If you haven’t received prior payments, keep in mind that qualifications for each payment vary slightly.
For example, the latest round of EIPs allows households to claim payments for their qualifying dependents with a Social Security number (SSN), even if the head of the household or married couple doesn’t have an SSN.
How to Receive Payments?
If you file your taxes, you’ll likely receive your payments automatically, and in the same way, you received your 2020, 2019, or 2018 tax refunds. The majority of costs will be delivered through direct deposit, check, or through a prepaid MetaBank debit card issued by the Department of Treasury.
If you don’t typically file your taxes
If you’re a recipient of certain federal benefits, you’ll receive the latest EIP in the same way you receive your benefit payments.
If you don’t typically file a tax return because your income is below tax-filing thresholds and you haven’t received an EIP, learn what steps you need to take.
Direct payments
The majority of payments will be issued in the same way you received your 2020 or 2019 tax refund or your federal benefits. If you have direct deposit set up for your tax refunds, your stimulus payments will be delivered to the same banking or credit union account or onto an existing prepaid card.
Check or EIP Card
If you’re not set up with a direct deposit, you’ll receive your payment by check or on a government-issued prepaid VISA debit card through MetaBank. If you received a card for one of your first stimulus payments, this card wouldn’t be reloaded, so you’ll receive a new card.
Federal benefits
Recipients of certain federal benefits, who don’t typically file their taxes, are likely to receive their stimulus payments the same way they receive their benefits. This includes recipients of:
- Social Security retirement, survivor, or disability (SSDI) from the Social Security Administration
- Supplemental Security Income (SSI) from the Social Security Administration
- Railroad Retirement and Survivors from the U.S. Railroad Retirement Board
- Veterans disability compensation, pension, or survivor benefits from the Department of Veterans Affairs
Eligibility for stimulus funds in prison:
Yes, if you meet all of the criteria.
If you’re currently incarcerated, you may use your institution address as your home address on Form 1040, even if it’s a P.O. box. Include your corrections or inmate identifying number in the section at the top so the IRS can mail you the payment. It’s best to add it near your last name.
If you didn’t receive your first or second EIP payment yet, and you didn’t file a return by the original deadline of May 17, 2021, you can still file a late 2020 return. You will face no late filing penalties if you have no balance due to the IRS. The Recovery Rebate Credit on Line 30 on the IRS Form 1040 is where you can claim any EIP you are eligible for but have not yet received.
If your agency or organization works with offenders or parolees or has a prisoner re-entry program, see the IRS Prison Reentry Program.
Get help if you need it.
You don’t have to be an expert to file your taxes. If you meet specific income requirements, there may be free tax preparation options to help you get your refund and all the credits you’ve earned.
Because of the pandemic, many Volunteer Income Tax Assistance (VITA) programs offer various tax preparation options in 2021, including virtual tax preparation, drop-off services, and self-preparation support.
In addition, get support with free tax preparation or software to prepare your own taxes through MyFreeTaxes or Free File Alliance.
If you do seek the help of a professional, ask them about choosing your 2019 or 2020 income in order to maximize your Earned Income Credit and Child Tax Credit.
Changing your dependent tax status
If you’re thinking of changing your filing status from dependent to independent, this may have significant consequences for whoever has been claiming you as a dependent. For example, they may miss out on other tax credits worth more than the Recovery Rebate Credit.
Take time to consult with your family or tax professional before changing your dependent status.
Check the status of your payment
The IRS launched a new Get My Payment portal that allows people to check their payment status and provide direct deposit information, including how the payment will be delivered (direct deposit, check, or debit card).
Special Considerations
Do stimulus programs work to help pull the economy out of a tailspin? In 2011, The Washington Post reviewed a series of studies that looked at the impact the American Recovery and Reinvestment Act (ARRA) of 2009 had on the economy. Out of nine studies, they found that six of them concluded that “the stimulus had a significant, positive effect on employment and growth, and three find that the effect was either quite small or impossible to detect.”
The Congressional Budget Office (CBO) found that the stimulus provided by the ARRA had by 2011 created between 1.6 million and 4.6 million jobs, increased real gross domestic product (GDP) by between 1.1% and 3.1%, and reduced unemployment by between 0.6 percentage points and 1.8 percentage points.8 It’s important to note that unlike the Economic Stimulus Act of 2008, the ARRA did not include direct stimulus check payments to Americans.
Instead, according to the CBO, the full stimulus package worked by:
Providing funds to states and localities—for example, by raising federal matching rates under Medicaid, providing aid for education, and increasing financial support for some transportation projects. Supporting people in need—such as by extending and expanding unemployment benefits and increasing benefits under the Supplemental Nutrition Assistance Program (formerly the Food Stamp program), and purchasing goods and services—for instance, by funding construction and other investment activities that could take several years to complete; and providing temporary tax relief for individuals and businesses—such as by raising exemption amounts for the alternative minimum tax, adding a new Making Work Pay tax credit, and creating enhanced deductions for depreciation of business equipment.
Criticism of Stimulus Checks and Programs
Critics contend that the stimulus added some $1 trillion to the deficit and shifted economic activity that would have happened anyway. A Mercatus study pointed to unemployment rates, which rose even after the stimulus was implemented, proving that stimulus checks were ineffective during the 2008 recession.10
According to the study, the median duration of unemployment reached a high of 25.5 weeks in June 2010, after averaging 7.2 weeks from 1967 to 2008. Like American economist Paul Krugman, others have contended that the stimulus amount was too small to be effective.
