Over the past two months, the coronavirus disease 2019 (COVID-19) has reshaped American societal habits. With the number of U.S. confirmed cases topping 1 million earlier this week, most states have been left with little choice but to mandate stay-at-home orders and require the closure of nonessential businesses. In the process, we've witnessed more than 26 million people lose their jobs.
In response to this never-before-seen financial upheaval, Congress passed and President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law five weeks ago, on March 27. At $2.2 trillion, it's the largest economic relief package in history, with money set aside for distressed businesses, small-business loans, hospitals, and an expansion of the unemployment benefits program.
But the aspect of the CARES Act that's garnering the most attention is the roughly $300 billion that's being directed to working Americans and Social Security beneficiaries.
Who's entitled to an Economic Impact Payment?
These stimulus payouts, which are officially known as Economic Impact Payments, recently began working their way to the American public, with an estimated 88 million people having already received their money.
According to the rules outlined in the CARES Act, the maximum Economic Impact Payment possible is $1,200 to single taxpayers and $2,400 to married couples filing jointly. Qualifying children aged 16 and under can also add $500 per child to what a parent or household receives. In total, an estimated 175 million people should receive stimulus money.
But at the same time, there are tens of millions of Americans who'll be disqualified from receiving a payout. The Internal Revenue Service will primarily be looking at adjusted gross income (AGI), tax-filing status, and citizenship when determining if a person or couple is eligible for an Economic Impact Payment.
For example, in order to receive the maximum stimulus payout of $1,200 or $2,400, a single, married, or head-of-household taxpayer would need to have an AGI of below $75,000, $150,000, and $112,500, respectively. Comparatively, if a single, married, or head-of-household taxpayer has a respective AGI above $99,000, $198,000, or $136,500 in their most recent tax filing, they're disqualified from receiving a stimulus check. Persons and couples with incomes in between these two bounds will see a reduced payout ($5 reduced for every $100 in AGI above the lower bound).
Additionally, dependents aged 17 and over are ineligible for a payout, as are undocumented workers who lack a pathway to legal citizenship. Note, senior dependents receiving Social Security are also excluded.
It's true -- your stimulus money can be seized under certain circumstances
However, just because you're technically eligible to receive stimulus money doesn't mean you'll get to spend it how you see fit. There are actually three ways your stimulus check could be seized.
1. Your bank could keep your stimulus check
Under the language of the CARES Act, federal and state collection agencies are barred from going after Economic Impact Payments. This means if you're in default on a student loan or owe back taxes to the federal government, you're still going to receive a stimulus check, if eligible.
However, private collection agencies aren't bound by the same mandates. This means that if you owe your bank or credit union money, it could, in theory, seize your stimulus money as soon as it hits your account via direct deposit to offset what you owe. Your bank might choose to do this if you have a negative balance in your checking account or are delinquent on an outstanding loan.
A number of national banks have already said they won't use their customers' stimulus checks to offset outstanding debts, including Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup. But this list isn't all-encompassing. If you owe your bank money, it's not out of the question that it'll take your payout.
2. Collection agencies could seize your payout
Somewhat building on the previous point, it's also possible for private collection agencies to go after your stimulus money. With millions of Americans having financial judgments levied against them, collection agencies could use these payouts as leverage for payment.
Under normal circumstances, a banking customer would have an opportunity to show just cause to their bank why their money shouldn't be garnished, and may have the ability to seek legal recourse to demonstrate that their account has been wrongfully pilfered. But with most courtrooms closed to nonessential business, legal recourse isn't even an option for some people facing a financial judgment.
On the bright side, some state-level attorney generals are fighting back and disallowing the garnishment of Economic Impact Payments by private collection agencies. It's possible we could see an official ruling from the Treasury Department on the issue, but for now, it's being approached on a state-by-state basis. That means if you have a financial judgment levied against you, you'll want to check with the laws in your state to determine if your stimulus money is at risk of being garnished.
3. The Treasury Department could withhold some or all of your payout
Third and finally, it's still possible for the Treasury Department to withhold some or all of your payout under one scenario: if you're delinquent on child support payments.
The Treasury Department will be reliant on individual states to share information concerning who's behind on their child support payments. Without this info, we could see instances where delinquent payers in one state receive a payout, while those in arrears in other states receive nothing or a reduced payout that offsets their reported delinquency.
In other words, being eligible for stimulus money still isn't a guarantee that you're going to receive it.