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The Stimulus Check Mistake Nearly Everyone's Making

By Dan Caplinger – Apr 28, 2020 at 12:01PM

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Make sure you get every penny you're entitled to receive.

The coronavirus pandemic has left millions of Americans unemployed, and nearly everyone is scrambling to try to make ends meet as best they can. Aid from the federal government is playing a critical role, and more than 88 million stimulus checks have gone out to those in need.

Just about every major news organization has come out with answers to the most commonly asked questions about the stimulus payment program. Time after time, though, you'll read one piece of incorrect information that could lead you to make a mistaken conclusion about your eligibility for the program. If you have children, then unfortunately, you can't necessarily rely on many otherwise reputable news sources to get a key aspect of the stimulus program correct.

Person with eyes closed, palm on forehead, and arm bent looking frustrated.

Image source: Getty Images.

How stimulus payments work for families

The provisions of the CARES Act set out the rules for the stimulus check program. Under the rules, most adults qualify to get $1,200 from the federal government. For every child a family has under the age of 17, the stimulus check amount will go up by $500.

What nearly everyone gets right is the income threshold for receiving the full stimulus payment amount. If you're single, then your adjusted gross income has to be $75,000 or less to get a full-sized stimulus check. For those who file as head of household, the corresponding income limit is $112,500, and $150,000 is the limit for joint filers. In other words, if you're below these amounts, then you shouldn't see any reduction to your check at all.

Am I going to get a stimulus check at all?

The language of the CARES Act gets confusing when it comes to what happens if your income is above those limits. What you'll read in a lot of new sources is that you're no longer eligible to get any stimulus check at all if you're single and earning more than $99,000, a head of household earning more than $136,500, or joint filers earning more than $198,000.

The reality is more complicated. The CARES Act added new Section 6428 of the Internal Revenue Code, which governs stimulus payments. Section 6428(c)(1) reads as follows:

"The amount of the [stimulus credit] shall be reduced (but not below zero) by 5 percent of so much of the taxpayer's adjusted gross income as exceeds $150,000 in the case of a joint return, $112,500 in the case of a head of household, and $75,000 in the case of [any other] taxpayer" emphasis added).

You'll see that there's no actual specific mention of $99,000, $136,500, or $198,000 in the law. Instead, you have to calculate the reduced stimulus check amount based on two things: the full amount you're entitled to, and how much your income exceeds the given thresholds.

Leaving families out

If you look at it, though, you can figure out why so many news sources are saying this. The $99,000, $136,500, and $198,000 amounts correspond to what would make a $1,200 payment for single or head of household filers or a $2,400 payment for joint filers go away entirely.

What they leave out, though, is the $500 for children. For example, take the following examples:

  • Say you're single with two children under 17. You'd be entitled to total stimulus payments of $2,200. Even if your income is $99,000, you'd still get $1,000. The reduction would be 5% of the $24,000 in excess of the $75,000 limit, or $1,200. Subtracting that from $2,200 gives you the $1,000 amount.
  • Head of household status requires a qualifying child, and although some qualifying children aren't eligible for the $500 stimulus payment, most are. A head of household with one child would still get a $500 check even with income of $136,500.
  • Joint filers face the same rules. A married couple with three children and income of $198,000 would still qualify for $1,500 in stimulus payments -- $2,400 less than the full amount of $3,900 that lower-income families would receive.

Get what you deserve

If you've got kids, take a closer look at the stimulus check rules. Even if you're in a relatively high-income group, you might still get a partial check even when some sources suggest you should get nothing.

Smart tax planning sometimes requires looking closely at the text of a new law rather than counting on summaries. All too often, a simplified version of what a law says gets vital details wrong -- details that could lead you to miss out on $500, $1,000, or more in lost stimulus payments.

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