Tiana Clewis: Hey Dreamers and welcome back to my channel where we break down all things money so it can stop being an obstacle and start being exactly what it is, a tool to help you create a life that's totally worth living.
In this video, I want to talk about a bit of news that's second only to the coronavirus itself: those government stimulus checks.
Unless you've been living under a rock, which is possible considering most of us have been told to shelter in place, you know that Congress recently passed the Coronavirus Aid, Relief and Economic Security Act, AKA the CARES Act. While this act has tons of provisions that are going to take up the next couple of weeks of YouTube videos and podcast episodes, the one thing that people are focusing on right now is section 2101 the part about the 2020 Recovery Rebates for Individuals, but you probably just call them stimulus checks.
So what we want to do today is we want to break down what are these stimulus checks? How do you qualify? How much are they going to be and what in the world should you do once you finally get it in your hands.
Before we start to break down the details of this part of the cares act, let me introduce myself to the newbies on the channel: I'm Tiana B Clewis, a Financial Lifestyle Coach and Start-up Strategist who's dedicated her life to helping women entrepreneurs break free of the nine to five grind and finally start living a life that they absolutely love, and we're gonna use money as a tool to do it.
Now, if this is a mission that excites you, it works for your spirit, do me a favor: like this video and subscribe to my channel. And then make sure that you hit the bell so you're notified every time I drop new money, tips and strategies every Wednesday and Saturday.
Okay. Now we have some stimulus checks to talk about.
First we have to know what are these checks, really?
Essentially, qualifying taxpayers are going to receive a tax credit to their 2018 or 2019 tax return that's going to be paid back to them within the next couple of weeks as some sort of check or direct deposit.
The purpose of this check is to stimulate the economy by putting cash into the hands of Americans. The truth is that with us having to shelter in place, millions of businesses are out there either seeing their revenue decrease or they're seeing their businesses completely shut down. There's no money coming in, and so that's leading to a lot of issues: reduced hours .It's leading to, um, people taking pay cuts. It's even leading to many people getting laid off from their jobs, either temporarily or what is potentially a permanent basis.
In fact, unemployment claims last week jumped from just under 300,000 in a week to 3.3 million. All in a single week. For my history buffs out there, you might already know, this is actually four times the record for unemployment claims.
That's kinda scary, right?
That's why right now people just simply aren't spending money the way that the government would like them to. And look, I'm guilty. I'm one of the people who's keeping her cash and I've been advising you guys to do the same. But with people getting laid off, they either don't have the money to be able to pay things, buy things, go shop like they normally would, or they're just worried. They're concerned and they're trying to keep as much cash as they can so that they can stay safe and be ready for whatever life throws at them.
So that's the reason why the government was like, "Look, we got to do something" and that something is putting cash into the hands of Americans so that they can spend it and stimulate the economy.
So the first question is, how big are these checks going to be? Well, you probably have heard about the fact that if you are a tax paying adult, that you will receive $1,200 for yourself. Or if you and your spouse filed together, then you're going to get $2,400 for the two of you. You've also probably heard about the fact that for each kid that you have, you're going to receive an additional $500.
Seems simple, right? Well, I mean, come on. It's Congress. Nothing's ever simple with Congress.
It starts getting real tricky if you have to figure out how much you're going to receive. If you're over these phase out thresholds. They're going to look at your taxes, they're going to find what is the adjusted gross income, and if you're over a certain threshold, which I'm calling the phase out thresholds, then they're going to start reducing the amount of money that you're going to receive. So if you're one of the people over the threshold, this calculation gets a little more complicated, but don't worry, it's not that bad. I'll walk you through it.
So what are the thresholds? All right. If you're single, then your adjusted gross income has to be less than $75,000 a year to receive the full amount. Otherwise it starts to phase down. If you're married filing jointly, the number is $150,000 a year, so double a single person.
If you qualify as a head of household - which basically means that you have dependent to live with you, so think a single mom, or, um, a single person taking care of maybe an aging parent - then those people, it changes to $112,500. I don't know what that's so awkward for me to say, but that's just the awkward number. So $112,500 is when that amount starts to phase out for someone who qualifies as head of household.
Now, if you're over the thresholds that I just said, then what they're gonna do is they're actually going to reduce the amount that you receive by 5% for every dollar that you're over that threshold amount. If you're over those thresholds, then your check is going to be reduced by 5 cents for every dollar that you're over the threshold. So if you're head of household and you make $112,501, then your check is going to be reduced by 5 cents. It's that simple. 5 cents for every dollar that you're over the threshold.
So let's do some math here. Let's say that you're married, you and your husband filed jointly, and you don't have any kids. All right? And let's say that you guys, your adjusted gross income for your 2018 taxes was $180,000.
Well, the first thing you want to do is you want to take the amount of money tha t is listed as your adjusted gross income and separate from that, the threshold, you're going to find that difference. So $180,000 minus the $150,000 threshold for a couple married filing jointly is a difference of what? $30,000?
Okay, so next you're going to take that $30,000 you're going to multiply it by 5% and that's going to give you. $1,500. So that means that your check is going to be reduced by $1,500. So in that case, as a married couple, you would have gotten $2,400, so you subtract 1,500. That means ultimately your check is going to be $900. The calculation is just that easy.
Now naturally, since we're talking about the government, there are going to be some nuances and so we want to dive into those real quick just so you have an understanding of what we're getting ourselves into.
One of those nuances is figuring out which tax return are they actually going to use. Remember I said 2018 or 2019.
It's really simple. If you have filed your 2019 taxes, they will use your 2019 taxes. But if you're like a lot of people and you have not filed your 2019 taxes because you're normal and you're not over achiever, hmm, they're going to use your 2018 taxes.
Now, let me tell you this. It's April 1st I know. You're like, "Oh my gosh, I only have 15 days to file." Well, that's not true. You actually have more time. Be excited because in the CARES Act, they actually extended the due date for taxes all the way from April 15th to July 15th. So they've given you an extra three months to get your taxes filed, which is great because with all of the programs that they have included underneath this new act, well, let's just say that your accountant is super busy right now, and it might take them a while to get to your taxes anyway.
So now that you know which tax returns they're going to use, the next question becomes, "Okay, how do they know how many people there in my household?" Well, they're going to use that very same tax return. So that tax return is going to tell them what your adjusted gross income is and it's also going to tell them how many people they need to be paying before.
So what they're going to do is they're going to look at how many people did you claim with their social security number. So you and your spouse filing jointly, if both of your social security numbers are there, you're going to get money for both of you. And then for every kid that you claim that you have their social security number listed, you will get paid for them as well.
Here's the thing where it gets a little interesting, and if I want to be real about it, it's kind of a karma situation. Crime doesn't pay guys.
If you're one of those people who you have the habit of "selling" your kid's social security numbers to other people so that they can actually get, um, an increased tax return, well, I'm sorry, but that person's going to get the $500, and not you.
I mean, but you kind of committed tax fraud so you can't feel too bad about yourself.
Now, if you're one of those people who's like, I don't do that, and I don't know why people would do that. Let me break it down to you. What ends up happening is for some people, they actually have so many kids that they don't even receive a deduction for every single kid that they claim. And so in those situations, it's not uncommon for people to say, "You know what? You can take this extra kid."
Now, from my understanding - now mind you, I'm not big on tax law - but from my understanding, it's three kids. So theoretically, my husband and I who have four kids, we don't have to claim all four of our kids on our tax return because apparently we only get a benefit for three of them from what has been told. But we claim all of them anyway and thank goodness that we do because all four of them will be added into our calculation for the stimulus check.
Well, for some individuals who find themselves with excess kids and they're like, "Okay, I'm not going to get any benefit from this", or if they're one of those people who, they might not have excess kids, but say they're worried that their tax return is going to get garnished, like back child support, or they owe the IRS money anyway, then many times these people will sell their information to someone else. That person will then give them essentially a kickback based off of the return that they get.
Um, yeah. Again, it's tax fraud, don't do it. And in this case, because you committed tax fraud, you're not going to get the benefit of that child on this stimulus check. So sorry, boo, but it is what it is.
P.S. I wanted to bring the substance. I'm talking about kids. If you're an adult now, so like you just turned 18 and your parents last year claimed you on their taxes as a dependent, as they should, I hate to break it to you, boo, but yeah, they're probably going to get $500 instead of you getting $1,200.
I'm sorry. I'm sorry. I hate to break the bad news to you. Now, this is not 100% certain, it's not crystal clear, but that seems to be the way it's leaning. More than likely if you just turned 18 or if your parents in the last year were able to claim you as a dependent on their taxes, there's a good chance they'll get the money and not you. Sorry.
Next, it's important to know whether or not you qualify. Hint, you probably do. So let me break down the criteria and I'm going to go ahead and read them because I'm worried I'm gonna jack them up.
So the first criteria is that you have to have paid taxes and 2018 or 2019, which means that essentially, you filed your taxes and your tax liability was greater than $0 dollars.
You're a human. And then we only say that because there are entities such as trusts or estates that actually do file taxes. So it needs to be a human being, not a trust, not an estate. A human.
You also cannot have qualified for the deduction under section 151 on the IRS tax code. Now, I don't know what that code is, but from my understanding, that's not most people. In fact, it's one of those deductions that if you have that deduction, you would know about it.
Finally, you can't be a nonresident alien. So if you are not classified as a non resident alien and you paid taxes in 2018 or 2019 and you had a tax liability greater than zero and you're a human and you didn't qualify for a deduction under section one 51 of the IRS code.:Congratulations, you qualify.
Now according to experts or research, that's going to be roughly 80% of American adults. So you've got a pretty good chance of getting up in there.
So now that we have all those things cleared up, I do want to actually address a couple of rumors that I've heard. So one of the rumors I heard, which had me freaked out temporarily, is that this is a tax advance and you would actually have to pay it back on your 2020 taxes.
Yeah, scary rumor. But that's not quite true.
So from my research, from what I - and I've like physically read the law myself, I've also looked at different articles of people analyzing the law - from my research, what it seems is that the only way that you would have to pay anything back on your 2020 taxes from this stimulus check is if they overpaid you.
So let's say for example, that based on the calculations you should have received the flat $2,400 but somehow they ended up paying you $3,000. Well, that $600 difference, if they discover it, they might actually require you to pay it back on your 2020 taxes.
But here's the thing, don't freak out. Okay? Because one of the things that they included in the cares act is that the IRS cannot charge you interest on any overpayments related to the act. So if they accidentally gave you $600 more than they were supposed to, that's okay. You'll pay it back on your 2020 taxes, but they can't charge you interest on it.
If you know anything about paying interest on money owed to the IRS, that interest is like a total pain in the butt. So be really excited that Congress included that particular provision in there. So are you going to have to pay the stimulus check back on your 2020 taxes? Probably not, but if they do overpay, you then they might make you pay that difference back and it's not going to be that huge of a deal because again, you're not going to have to pay any interest on the amount. So just think of it as a no interest loan that you got from the government. Who doesn't want that?
Now, I also heard a rumor that if you owe the IRS money, they actually are able to keep your stimulus check. And again, based on my research, that's simply not true - in most circumstances.
Now, when you read the law, it actually specifically outlines that you cannot have your money withheld because of, I think it's like three different provisions in the IRS tax code that they say your money cannot be reduced,
your money can not be offset, for these reasons. And when I looked a little deeper, I saw that basically it was you owe the IRS money because of back taxes. Or let me see what was the other one? Um, legally owed debt or money. So you know how sometimes the IRS will take your money because you owe a debt somewhere else. So they can't do it for that.
And then if you just owe the IRS for any other reason. And yes, there are other reasons why you can owe the IRS money other than back taxes. There can be penalties. There can be interests. There can be other stuff.
So basically it specifically outlines these three primary reasons of why the IRS would take your money, that they can't do it this time. They cannot take your stimulus check for those reasons.
Now, the one thing that's not quite clear is whether or not they can take it for back child support. That's the one rumor that I have not fully been able to clarify or to eliminate.
Now, that provision, um, that I mentioned before where like they can't take it for a certain debt, well, I mean, you can maybe apply that here. I don't really know. So I'm not going to just tell you no, they can't take it for back child support because technically if they take your money for back child support, they're still accomplishing what they want to accomplish. They're getting money from the government's coffers into the hands of an American citizen. The only thing is it won't be you, it'll be the person you owe the child support to. So if they do that, they'll - there - they would still be accomplishing their goal. So I'm not 100% sure whether or not you will get your money if you owe back child support. So I'm sorry if you don't, but at least you could emotionally prepare yourself.?
That's all I got for you.
Okay. So there's one more thing you need to know, and of course it's probably like the biggest question on your mind after you knew how much it was and whether or not you're qualified and whether or not they could take your money. The biggest thing is "When am I going to get my check?"
Well, it's this, I don't know. That's the truth of it. I don't really know and the government doesn't really know either.
Now, if you listen to the head of the treasury department, Steven Mnuchin, he's that he wants to start sending out the money as soon as April 6th. The problem is that a lot of people are saying that that timeline is really unrealistic and that the best we can do is look at what happened when they gave out stimulus checks back in 2008. So in 2008 it took them about six to eight weeks to get stimulus checks out. So it could be as early as April, but it could be as late as the end of May.
The cool thing is if you're one of those people who you already allow your tax refunds to be deposited back into your bank account or directly by the IRS, then cool. You're probably at the front of the line because direct deposit is so much easier.
But if you're one of those people that they actually have to physically mail you a check - yeah, snail mail, I call it that for a reason - if they have to physically mail you a check, it's naturally going to take a little bit longer. But if you checked out one of my videos from last week where I mentioned the stimulus checks, and not to include the stimulua checks in your April budget just yet, questions like that is the reason why. They don't know exactly when it will come out. So it might be April, but it very well could be May.
Okay. I think I covered all of the questions that you would have. I know I've covered all the questions that I've been receiving and if I can be real about it. This was not a fun, this was not fun to prepare for. Okay. This wasn't fun at all. Seriously.
Okay. The reason why wasn't fun is because it sent me, it gave me flashbacks to my forensic accounting years where I had to read through laws and laws are exhausting to read. It has all these sections and all these provisions and all these extra little nuances and the "but pursuant to section a of such and such and such and such". It's terrible. It's. It's horrible to read, but I wanted to do the best that I could to be able to give you guys accurate information because I have seen some rumors out there. I want to do my best to address them properly. I want to give you real accurate information, but let me tell you, your girl had some flashbacks to her forensic accounting days. Okay?
Don't do me like that no mo'. Mm mm. Don't even like that.
Now that we have a good understanding though of what the law actually says and how we're going to get the rebate checks and what's it going to look like and how we can calculate it - we need to talk about my recommendations for how you should actually stretch that check and make it work for you.
But we're actually going to do that in the next video. We're not going to do that right now. You have to wait until Saturday.
Okay, I lied you don't have to wait till Saturday. If you're one of those people who's super impatient, you want to get a head start on making your game plan for how you're going to spend your stimulus check, and so you naturally want my tips and tricks ASAP, I got you covered. Don't worry. You know how I do. Unless you're new. Then you don't know how I do.
All you have to do is head over to the Dreamers Financial Playbook podcast, wherever you like to listen to podcasts and download episode 98. Fast forward roughly halfway through the episode and boom, you're in business.
Naturally. I have included the links to access to the Dreamers Financial Playbook podcast on Google, Apple, iHeartRadio, and more in the description.
Before you run off to the Dreamers Financial Playbook podcast, let me know that you found this video useful by smashing that like button and subscribing to my channel. Make sure that you hit the bell so that you're notified when I dropped my new video this Saturday.
Finally, if you're looking for more information, some videos, some content that's going to help you take back control of your money during this season of uncertainty, I have a couple of videos right here that are absolutely perfect for you.
Now with that, how's the you this weekend. Bye, bye.
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