CARES Act stimulus payments started going out to millions of Americans this week. The IRS started sending direct deposits on April 9th to taxpayers whose information was already on file. Paper checks may take longer, but eventually, everyone will receive their stimulus payout. Stimulus payments start at $1,200 for individuals and $2,400 for married couples. Families with qualifying children will receive an extra $500 per qualifying child.
Now, before we talk about how to spend your stimulus money, let’s work on getting it. Already have your stimulus money? Click Here to skip straight to what to do with it.
How to Get Your Payment
The IRS is using information from 2019 tax returns to determine who will receive a payment. If you haven’t filed your 2019 taxes, they will use the information from your 2018 return instead. Any stimulus funds that aren’t sent out now can be claimed as a credit next year when you file your 2020 tax return.
Some taxpayers will have higher income this year than they did last year. The IRS says that if you qualified for stimulus using your 2019 or 2018 tax return, you won’t have to give the payment back even if your income is over the limit in 2020.
The IRS has created a web page for taxpayers to check the status of their stimulus payment and update banking information. However, not all taxpayers are in the system yet. The IRS is updating information in this system once a day, so if it can’t find you, be patient and keep trying!
Many Americans were not required to file a tax return in 2018 or 2019. Non-filers who receive Social Security benefits, don’t need to do anything – the IRS will send your stimulus check by the same method. However, non-filers who receive one of these benefits and have a qualifying child under age 17, you can apply for an extra $500 per child stimulus payment. This page also allows those who are not required to file a tax return and do not receive Social Security benefits to provide the information needed to receive a stimulus payment.
Making the Most of Your Payment
Once you have received your stimulus payment, what now?
If your finances are hurting because of the pandemic, use your stimulus payment for whatever you need to make it through this crisis. This could mean catching up on bills or topping off your emergency fund. Many lenders are offering to adjust debt payments. If you are in a tough spot, look for help from your creditors first before you use your stimulus money.
If you don’t need to spend your stimulus money on immediate and urgent needs, the next thing to look at are your emergency fund and your debts. Top off your emergency fund and pay down any high-interest rate revolving debts. For most of us, the stimulus money won’t be enough to make a dent in our long- term debts like a mortgage. Paying down long-term debts with low-interest rates isn’t a terrible idea, but there are probably better ways to use your stimulus money.
Once your emergency fund is topped off and your debts are under control, you’ll be in a good spot financially. You should consider using some of your stimulus money for things you wouldn’t normally spend money on. The past two months have been very stressful for everyone. It’s okay to spend a little bit to improve your mental health and reduce stress. This could mean buying a luxury item, making a charitable donation, subscribing to a streaming service, or even buying some exercise equipment. You could also set aside some of your stimulus money toward a post-pandemic vacation.
As with everything financial, the key to success is having a plan and sticking with it. Make a plan for your stimulus money, and then use it!
Rick Bernard | MBA