On Dec. 29, 2020, then-President Donald Trump signed a $900 billion coronavirus stimulus package into law. It was the fourth piece of COVID-19 stimulus legislation to become law in the United States since the pandemic hit and the second to include stimulus checks — which the IRS calls “economic impact payments” — for most Americans.
According to CNN, this latest piece of legislation allocates $600 in stimulus funds to most American adults earning $75,000 adjusted gross income (AGI) or less, $1,200 per couple earning $150,000 AGI or less, and $600 per qualifying minor dependent.
Above those income thresholds, payments step down by $5 for each additional $100 in eligible income until they phase out entirely. Americans who do not normally file tax returns are eligible to receive these stimulus payments, though they may be required to file simple informational tax returns to claim the funds.
The latest COVID relief measure follows up an initial round of larger stimulus checks that allocated $1,200 to adults earning $75,000 AGI or less, $2,400 to couples earning $150,000 AGI or less, and $500 per qualifying minor dependent. And it may not be the last batch before the pandemic ends.
Shortly after passing the spending bill Trump signed on Dec. 29, 2020, the U.S. House of Representatives passed another stimulus measure that would replace the $600 checks with $2,000 checks, subject to the same income restrictions and phaseout formula. That bill ultimately wasn’t signed into law, but it did foretell a similar measure authorizing a third round of stimulus checks worth $1,400 that became law in early March 2021.
Fortunately for Americans counting on the second round of checks to top up their bank accounts after the holidays, this second measure’s fate has no bearing on the second round of stimulus payments. Most Americans have already received those payments.
Are You Eligible for the Second Round of Stimulus Checks?
The vast majority of American adults and children are eligible for the second round of payments passed in December 2020. Not all adults will receive the full $600 allotment per qualifying individual, and — as was the case with the first round — some won’t receive any payment at all due to income restrictions.
Regardless of your income or the amount you receive, you won’t need to pay income taxes on that amount or even claim your payment on your federal tax return. However, eligible recipients who typically don’t file tax returns (or didn’t file in 2018 or 2019) may need to file at least a simple return to ensure receipt. Refer to updated IRS guidance to determine whether you need to file.
Income Limits & Phaseouts for the Second COVID-19 Economic Impact Payments
During the second round of COVID-19 economic impact payments passed by U.S. lawmakers, the maximum AGI thresholds to receive the full $600 payment per individual remain the same:
- $75,000 for single filers
- $112,500 for head-of-household filers
- $150,000 per couple for joint filers
The phaseout formula remains the same as well. However, because the starting point is lower, the final phaseout threshold is lower than the first round’s:
- $87,000 for single filers
- $124,500 for head-of-household filers
- $174,000 per couple for joint filers
As with the first round of stimulus checks, the IRS will use 2019 income (if available) to determine eligibility and calculate payment amounts. If 2019 income is not available, the IRS may default to 2018 income.
If you lost your job or saw a reduction in income in 2020, your eligibility or payment amount won’t change at all. Americans receiving extended unemployment benefits or other forms of COVID-related financial aid, such as Paycheck Protection Program loans, are eligible for this round of stimulus payments as long as their 2019 income qualifies.
Economic Impact Payments for Children in the Second Round of COVID-19 Stimulus
Minor dependents (children age 17 and under) are eligible to receive $600 per individual in the second round of COVID-19 impact payments. That’s a $100 increase per child over the $500 payments provided by the Coronavirus Aid, Relief, and Economic Security Act (the first stimulus package featuring direct payments to citizens).
As with the second round of payments to adults, the phaseout formula and process for children remain the same as in the first round.
How & When to Expect Your Second COVID Stimulus Payment
The IRS’s preferred delivery method for this round of stimulus checks is electronic (direct deposit), not paper checks. But the IRS needs up-to-date bank account information for any recipient who’d like to receive payments by direct deposit.
If you haven’t yet filed your 2018 or 2019 taxes and don’t want to wait weeks to receive a paper check, you may need to take action.
How to Receive Your Stimulus Payment Electronically
First, the good news: If the IRS has up-to-date bank account information for you, your stimulus payment should arrive sometime during the first half of January 2021. The IRS has indicated its intention to send electronic payments to eligible recipients no later than Jan. 15, 2021. If you received your first stimulus payment electronically and your bank information hasn’t changed, the second payment should hit that account soon.
If the IRS doesn’t have current financial account information for you and you haven’t filed (or don’t plan to file) a 2019 return, use the Get My Payment tool linked from the IRS’s coronavirus information page to provide it. The process should take less than five minutes — you just need to confirm your most recent AGI and your refund or tax-owed balance.
How to Receive Your Stimulus Payment by Paper Check or Prepaid Card
If you don’t mind (or prefer) receiving your stimulus payment by paper check or prepaid card, you shouldn’t need to take action right now unless the IRS does not have your current address on file. If you’ve moved since filing your most recent federal tax return, complete and mail Form 8822 (the agency’s official change-of-address form). Confirm you’re sending it to the appropriate IRS mailing address, which is on Page 2 of the form.
If you didn’t file a federal income tax return in 2018 or 2019 and have changed addresses since your last filing, you may need to file a simple federal tax return. Use a free tax filing resource to avoid out-of-pocket costs for this step.
When to Expect Your Stimulus Payment
Direct-deposited stimulus payments should arrive in most accounts by the middle of January 2021. Paper checks and prepaid cards could take weeks longer to arrive.
If you’re concerned your stimulus payment might be missing or lost in the mail, use the Get My Payment tool in the IRS Economic Impact Payments portal to confirm you’re eligible and get an estimated arrival date.
After the IRS sends your payment, you’ll receive a written notification explaining how and when it came. This notification should come from the IRS’s facility in Austin, Texas, but it may have a different return address depending on where you live and pay taxes.
If you don’t receive your payment within seven days of receiving your notification, contact the IRS for more information.
What to Do While Waiting for Your Second Stimulus Check
If you’re still waiting on your second stimulus check and need cash right away, you have options. Once your stimulus payment hits your account or arrives in the mail, use it to pay down any expenses incurred along the way. You can repeat the process ahead of the third round of economic stimulus payments expected to hit most Americans’ bank accounts or mailboxes in the spring of 2021.
Trim Recurring Expenses Right Now
Use a bill negotiation app like Billshark or a mobile-friendly budgeting app like You Need a Budget (a leading Mint alternative) to wrest some control over your day-to-day spending. Bill negotiation apps work in the background to drive better deals on recurring expenses you can’t avoid, like cable-and-Internet subscriptions, while nextgen budgeting tools identify savings opportunities hiding in plain sight in your monthly cash flow.
Consolidate Debt With High Interest Rates
If you’re struggling to make progress on those high-interest credit card balances you’ve been carrying, look into a 0% APR balance transfer credit card like the Citi® Double Cash Card (18 months at 0% APR). As long as your credit is solid and you earn reliable income, chances are good you’ll qualify for one. Just review best practices for using balance transfer credit cards responsibly before applying.
If a balance transfer credit card isn’t your cup of tea, consider an unsecured personal loan instead. You may be able to borrow more with a personal loan, though it’s less likely you’ll qualify for a 0% APR promotion.
Pick Up a Side Hustle
If you have a few extra hours to spare each week or an underutilized asset that’s gathering dust, consider picking up a side hustle. Nearly half of all working Americans have side hustles, according to data crunched by Yahoo Finance, so you’ll be in good company. If you enjoy it, your side hustle could endure long after you receive your second stimulus check (and maybe your third).
Need side hustle ideas? Delivery apps like Instacart and DoorDash are always looking for qualified drivers, and if you don’t have the time to spare or don’t feel like spending more time than necessary on the road, there’s a good chance you can earn real income listing your vehicle on a P2P car rental marketplace like Turo. Another great passive income opportunity, if you have the space: renting out a spare bedroom to short- or medium-term guests or even storage space on Neighbor.com.
Use a Paycheck Advance App
If you’re short on cash right now, use a reputable paycheck advance app (we’re partial to Brigit) to cover the shortfall until your next payday. Brigit’s base version doesn’t charge fees for advances or recurring monthly subscription, though you can add overdraft protection for a $10 monthly fee. Use your stimulus funds to pay back your advance and build a savings buffer to reduce your reliance on paycheck advances in the future.
Democrats and Republicans don’t agree on much these days. But the parties’ respective leaders — Speaker of the House Nancy Pelosi, President Joe Biden, Senate Majority Leader Mitch McConnell, and former President Donald Trump — have cooperated on several significant pieces of stimulus legislation since the coronavirus outbreak began.
They might not be done. Although the end of the pandemic’s acute phase is within sight, the economy has a long road to recovery, and the federal government might need to do more to ensure that recovery remains on track. A bipartisan effort to issue a third round of stimulus payments proved successful in the first quarter of 2021, sending out a third wave of direct payments worth up to $1,400 per American. Big infrastructure and tax reform bills could follow later in the year.
In the meantime, if you’re eligible for the current round of stimulus payments, you’re entitled to do some daydreaming. Time to begin thinking about what you’ll do with your stimulus check.