How The Second Stimulus Check Is Similar Yet Different Than The First Stimulus Check – Forbes

Nemelka Hearing — UNITED STATES – JULY 21: Chairman Chuck Grassley, R-Iowa, fixes his hair during the Senate Finance … [+] Committee confirmation hearing for Michael N. Nemelka, nominee to be a deputy U.S. Trade Representative, in Dirksen Building on Tuesday, July 21, 2020. (Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images)

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Yesterday, Senate Leader Mitch McConnell (R-KY) announced the HEALS Act on the Senate floor and a number of Senators proposed their respective parts.

One of the most await parts of the future bill is the next stimulus check, which fell under the purview of Senator Chuck Grassley (R-IA), the Chairman of the Senate Finance Committee.

Senator Grassley’s office would later release the legislative text for the American Workers, Families, and Employers Assistance Act, which provides for the second recovery rebate.

In many ways, the second stimulus check is a repeat of the first. In some ways, it’s slightly more generous. Let’s take a closer look.

How The Next Stimulus Check Is The Same

The Base Amount of the Check

The amount of the check is the same – single filers get $1,200 and joint filers get $2,400. You get an additional $500 per dependent, though the definition of a dependent was expanded (more on that below in the section on differences).

The income limits, which refer to adjusted gross income (AGI), are:

Single filers – $75,000
Joint filers – $150,000
Heads of Household – $112,500

If you have an AGI greater than those limits, your check is reduced by 5% of your AGI above the limit.

For example, a single filer with an AGI of $80,000 would see a reduction of their check of $250. 5% of $5,000, the amount over $75,000, is $250.

The Tax Year Used for Income Determination

The second stimulus check will also use the 2019 tax year income for calculating your check amount, if available. If they do not have that information they can still use 2018 tax year information as an alternative.

This is the same as with the Cares Act, except the Cares Act also extended the due date of your 2019 tax return to July 15th. This meant that when the IRS was sending out the checks, a lot of Americans hadn’t yet filed their tax returns.

Your second stimulus check may be for a different amount depending on how much your income changed from year to year.

The Tax Structure of the Check

Both checks are advances on a refundable tax credit for the 2020 tax year. This means that the bill would create a new refundable tax credit based on your income and will pay that to you now as an advance.

The credit is based on your 2019 tax return, if you filed one, otherwise it can use your 2018 tax return as a default. It is widely expected that if you don’t file a tax return, you can update your information on the IRS Non-Filers: Enter Payment Info Here form if you didn’t do so already for the first check.

It Is Protected Against Federal or State Debts

The second check will also be protected against federal or state debts, with the exception of past due child support payments.

How The Next Stimulus Check Is The Different

The key difference between the first and second check has to do with three areas.

Expanded Definition of a Dependent

With both stimulus checks, you get $500 for each dependent regardless of their age. In the Cares Act, you only received an extra $500 per dependent if they were a qualifying child for the purposes of the Child Tax Credit. This essentially only applied to children under the age of 17.

This left out a lot of dependents, most notably children in college who are still dependent on their parents but who are older than 16 and elder family members. The American Workers, Families, and Employers Assistance Act removes any age qualification.

Deceased & Incarcerated Explicitly Excluded

The second stimulus check will not be given to those who died before January 1st, 2020 or those who are in jail for the entirety of 2020.

The Cares Act didn’t include any language covering this but the Treasury Department took away payments, and canceled uncashed checks, to these two groups. The bill now clearly states that both groups are excluded from receiving this second check.

It is Protected Against Creditors & Debt Collectors

The Act would also add additional protections against bank garnishment or levy by debt collectors. In fact, the new law would amend the Cares Act to offer those protections to the first check as well.

How The Next Stimulus Check Differs from Heroes Act

Since Senator Grassley’s bill is, at this point, only a proposal – how will it be perceived by the Democrats?

The Heroes Act was passed by the House of Representatives in the middle of May and it also included a similar stimulus check. As we look towards the negotiations between the two parties, we can use this as a gauge of how contentious this aspect of the bill might be.

The Heroes Act offered up a identical base stimulus check of $1,200 for single filers ($2,400 for joint filers) with the same income limitations. It differed in that it offered a higher $1,200 per dependent addition, with a limit of three dependents.

As we monitor how both parties are responding to the HEALS Act proposals, it doesn’t appear that there is much controversy around the second stimulus check. Of the items proposed in the American Workers, Families, and Employers Assistance Act, the biggest argument appears to be over the reduced federal unemployment insurance benefits.

The proposed bill looks to reduce the federal benefit to 70% of an employed worker’s lost wages. Since this is going to be difficult for many states to implement, the bill would first provide a $200 per week bebefit through September as the states revamp their systems to support a percentage based benefit.

To make matters even more complicated, the bill is part of a series of bills that will make up the HEALS Act. This likely sets up a bit legislative battle that will be difficult to resolve before the Senate is scheduled to go to recess on August 7th.