The CARES Act and the Covid-19 Stimulus Check

The coronavirus is hitting us hard – it’s severely impacting not just our health and freedom of movement, but also our finances and earning potential. Some of us have lost jobs, and some have been asked to stay home by our employers, unsure of what’s going to happen beyond the next few weeks. In an unprecedented move, the government has implemented a massive care package, meaning that you could be receiving a stimulus check.

But it’s not entirely clear what that means and you might have questions – are you eligible? How much should you receive? If it hasn’t arrived yet, will it? Well, hopefully this will clarify things a little.

What is the CARES Act?

To boost household finances – and also to support businesses to survive the pandemic, but that’s for another post – the Government has just implemented the largest economic relief package in history.

Over $2 trillion has been allocated to protect the American population from the economic effects of this pandemic, and this was passed by the Government in March 2020 as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Whilst the Covid-19 stimulus check – or ‘recovery rebate’ – is just a small part of the CARES Act, it probably directly affects the most people, so let’s have a look at what it might mean for you.

Who Gets a Covid-19 Stimulus Check?

At the moment, about 150 million people nationwide are going to be eligible for the Covid-19 stimulus check. It’s thought that 88 million people already have received theirs.

You’ll be eligible if you have a Social Security number and filed taxes in 2018 or 2019. If you didn’t earn enough to file and receive Social Security payments, you’ll still be eligible.
You’ll need to have earned under a certain threshold to be eligible:

  • If you’re a single filer, you must have earned less than $99,000
  • If you file as a head of household, you must have earned less than $136,500
  • If you’re married and file jointly, you must have earned less (combined) than $198,000

You won’t get one yourself if you’re already on someone else’s claim as a dependent.

How Much Will I Get?

The amount that you’re entitled to is based on the AGI (adjusted gross income) from your most recent tax return. The amount that you get will reduce for anything you earn over and above a certain figure, depending on your filing status. This chart breaks it down:


Payments will then reduce by $5 for each $100 earned over that AGI threshold. So for example, if you’re a single filer on $80,000 you’re earning $5,000 over the threshold, meaning you’ll receive $950.

You’ll receive an additional $500 for each child under the age of 17, as long as your income falls within the relevant thresholds.

How Does This Affect My Taxes?

The Covid-19 stimulus check is, officially speaking, a type of tax credit, given in advance. Normally, you’d claim a tax credit at the end of the tax year, but this is being given as an advance to help families deal with any economic impact of the spread of Covid-19.

The stimulus check will not affect your tax refund and it does not need to be included when declaring your gross income on future tax returns. It is not taxable, and it would not be income that could change your tax bracket.

What Do I Need to Do?

In theory, and in most cases – nothing. If the IRS already has your bank information from your most recent filing, then you’ll just receive a direct deposit. You should in theory have already received this by now.

If the IRS doesn’t have your bank information – if they’ve never had to send you a refund, for example – then you send them your details here. However, they might have already sent you a paper check. Bear in mind, they think it might take up to five months for all of the paper checks to be sent out. They’ll be starting with the lowest earners, and working their way up.

If you haven’t filed a tax return for 2018 or 2019, but should have done, you’ll need to do this before you receive your stimulus check. They’ve extended the deadlines for doing this, but you’ll want to get on with that as quickly as possible. No late filing or late payment penalties will be applied, if you file before July 15 2020.

If you don’t file taxes but you get federal benefits, you also need to do nothing – they’ll already have the information they need to send you the stimulus payment.

If you’re not required to file a return for 2018 or 2019 and you do not receive Social Security payments, then you’ll need to use this IRS tool to get what you’re entitled to.

Will There Be More to Come?

As the pandemic progresses, the economic uncertainty continues. It’s unclear which businesses will be able to reopen when, and things are varying from state to state. So it’s not at all obvious when families will be able to see their income returning to normal. A second round of direct payments is currently being debated and may be approved over the coming weeks.

People are extremely concerned about the economy and their finances right now – and whilst it’s understandable, as seeing the values of your savings pot diminish is alarming and people aren’t sure whether or not to dip into their retirement funds to help them get through.

The CARES Act has been passed as an emergency effort to help us all get through this extraordinary event as financially unscathed as possible, so sit tight and use that Covid-19 stimulus check wisely.

If you want to take this time to have a review of your financial situation, get in touch today and we’ll get an appointment booked in.

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