*UPDATED AS OF DECEMBER 23, 2020
If you’re struggling to make ends meet due to the impacts of Coronavirus, a second stimulus could be coming.
The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 – a $900B relief package to deliver the second round of economic stimulus for individuals, families, and businesses was passed by Congress on December 21, 2020 and is awaiting signature by the President.
Here’s a rundown of what’s included in the pending legislation and what it means for you.
Am I Eligible for the New Stimulus Check?
The pending legislation includes a second wave of direct stimulus payments for millions of Americans – up to $600 for eligible individuals, $1,200 for joint taxpayers, and an additional $600 for each dependent child under 17. This would mean a family with two children could receive $2,400.
Based on pending legislation, you have an adjusted gross income (AGI) of up to $75,000 ($150,000 married filing jointly), you could be eligible for the full amount of the recovery rebate.
*Note, adjusted gross income (AGI) is your gross income like wages, salaries, or interest minus adjustments for eligible deductions like student loan interest or your IRA deduction. Your AGI can be found on line 8b of your 2019 Form 1040.
As your AGI increases over $75,000 ($150,000 married filing jointly), the stimulus amount would go down. The stimulus check rebate would completely phase out at $99,000 for single taxpayers, $136,500 for those filing as Head of Household and $198,000 for joint filers with no kids.
The pending legislation also expands stimulus payments to mixed-status households (households with different immigration and citizenship statuses), meaning more households may be eligible for this stimulus than were for the first round. This also may be retroactive, so some individuals that were ineligible for the first stimulus, provided under the CARES Act, may then be eligible to receive that payment as well.
*Note, if you think you may have been eligible for the first stimulus, but didn’t receive it, don’t worry. TurboTax will help you claim your stimulus payment in the form of a recovery rebate credit when you file your 2020 tax return.
Those people receiving Social Security retirement, disability, Railroad Retirement, VA, or SSI income and are not typically required to file a tax return, would again receive a stimulus payment. As in the first round, the IRS would use the information from your Form SSA-1099, Form RRB-1099, or the Veterans Administration to generate your stimulus payment
How Will I Get My Stimulus Check?
If the pending legislation is signed into law, the IRS will begin work to issue second stimulus payments. As of today, there is nothing you need to do to get a stimulus payment. The IRS will issue payments using the most recent information they have on file, likely from your 2019 tax return, either by direct deposit or by check.
Extended Unemployment Benefits
For those who have lost their jobs, the unemployment portion of the stimulus package should provide much-needed relief.
Based on pending legislation, unemployment payments would be increased by $300 per week and the benefits will be extended until March 14, 2021.
It would also extend the Pandemic Unemployment Assistance (PUA), which expands unemployment to those who are not usually eligible for regular unemployment insurance benefits. This means that self-employed, freelancers, and side giggers would continue to be eligible for unemployment benefits.
Certain workers who have at least $5,000 per year in self-employment income, but are disqualified from receiving Pandemic Unemployment Assistance because they also have an employer could also be eligible for an additional $100 per week in unemployment benefits, in the current legislation.
Student Loan Deferment
College students and parents will continue to get student loan payment forbearance through April 1, 2021 which includes both the principal and interest payments on federal student loans.
The temporary reprieve won’t affect borrowers who are working toward Public Service Loan Forgiveness, and the six month period will count towards the 120-payment requirement for PSLF. Those who are not struggling financially can continue to make payments if they so choose.
Private student loans are not included in this reprieve, as well as government loans made under the now-defunct Federal Family Education Loan (FFEL) program. If you have FFEL loans, you’ll have to apply for deferment or forbearance, during which time interest will still accrue.
To find out if your loans are covered under this program, log onto your student loan account. If it says you have Direct Loans, then your loans will be covered. You can also try to call the loan servicer but be prepared for long hold times.
Added tips on how to use the stimulus check:
If you are in any kind of financial hardship or income reduction – consider using your stimulus payment to pay for your essential expenses. If the stimulus payment and unemployment will not be enough, call your lenders or banks directly and try to work out a reasonable payment plan or see if they can defer (with no interest) any of your payments.
If you need access to additional loans, do your due diligence and find the best option for your situation.
If you currently have a job but are worried about your or a spouse’s job security – Consider stopping any extra debt payments you are making right now and save all extra cash into your emergency fund. You can use any cash you have leftover to make your deferred extra payments when things get back to normal.
If you have a job and aren’t worried about income fluctuations, you can keep going with business as usual including investing and making extra debt payments but also make sure you have an emergency fund that can cover at least 6 months worth of living expenses. You could also consider helping your family, friends and community with any extra income you may be lucky to donate or lend.