A lot of rumors arise when it comes to free money, and that’s no different for the direct payments the government is sending out to every eligible American, so let’s debunk some stimulus check myths so you can avoid being scammed out of your money.
It’s not very often the U.S. government gives a handout with no strings attached, but the formally named “Economic Impact Payments” to help fight the ongoing economic hit from the coronavirus outbreak appears to be one of those rare occasions.
The Internal Revenue Service has started sending electronic payments directly into bank accounts this week, and the Department of the Treasury announced Monday that over 80 million will receive their stimulus checks by week’s end. Tens of millions of those payments should hit bank accounts by Wednesday, even.
“We are pleased that many Americans are receiving their Economic Impact Payments,” Treasury Secretary Steven Mnuchin said in a press release. “This Administration is delivering fast and direct economic assistance to hardworking Americans, and we hope these payments will bring them much-needed relief.”
Let’s take a look at some of the biggest stimulus check myths and squash them.
Stimulus Check Myths
1. The Economic Impact Payments Will Be Taxed
This may come as a shock, but the stimulus check myth that the payments will be taxed by the government are simply not true.
Individuals earning up to $75,000 will receive a check for $1,200, while joint filers will get $2,400 on income up to $150,000. The government structured them as refundable tax credits, so even people who do not typically file taxes are eligible to receive the stimulus check, according to the Tax Foundation.
2. I’ll Have to Pay Back the Stimulus Checks Next Year
The second stimulus check myth that needs to be debunked is that you’ll have to pay back whatever amount you received at some point down the line.
As long as your tax information on your latest tax return (either 2019 or 2018) is correct, you won’t have to pay anything back. In fact, you may get more money next year if your adjusted gross income (AGI) drops in 2020.
Individuals are eligible for $1,200 for up to $75,000 AGI, but that $1,200 is reduced by $5 for every $100 you make over that cap, up to $99,000. At that point you would receive nothing.
So if your stimulus check is reduced or even eliminated because you make more than $75,000, you could get back the difference in 2021 if your income falls under the threshold in 2020.
The Tax Foundation found that the IRS will not penalize you for making more in 2020, either.
“If the amount of a credit a taxpayer qualifies for in 2020 is less than it was based on their 2019 return, it does not have to be paid back,” the organization told CNBC.
3. This Is Just an Advance on Next Year’s Tax Refund
This is just flat out wrong. Per Forbes:
Your 2020 tax return and any refund you’re due when you file that return in early 2021 will not be affected by the check you’re getting now.
The stimulus check is unique in that it is an advance, fully refundable tax credit. You will claim the tax credit on your 2020 taxes next year, but it can’t be used as a double benefit by lowering your tax bill when you file your 2020 taxes.
The simplest way to think of it is that the stimulus check won’t be included in your 2020 income. You don’t need to worry about entering a higher tax bracket because of the payment or anything.
“Your taxes aren’t going up next year because of this package — there’s no big income tax changes in the CARES Act,” CBIZ Managing Director Bill Smith told Forbes.
4. I Won’t Receive Payment Because I Can’t Sign Up
If you filed taxes in 2018 or 2019, you won’t have to lift a finger in order to receive your stimulus check. You’ll either receive it through direct deposit into your bank, or a physical check will be sent if you elected to receive your tax return that way.
Some lower-income individuals who don’t typically file tax returns are still eligible for the Economic Impact Payment, but they will need to go to a newly created IRS web portal here to submit their bank account information in order to receive payment.
So if you’ve heard this stimulus check myth — fear not. This isn’t some exclusive club that you have to jump through a million hoops to join.
A Stimulus Check Scam to Watch For
There are plenty of stimulus check myths floating around, and so much misinformation only helps scammers trying to take advantage of anyone receiving the money.
The Federal Trade Commission is warning everyone to be vigilant, and report anything suspicious to them.
One specific scam is an official-looking “check” from the IRS sent by scammers claiming the tax entity accidentally paid too much to you and needs you to pay some of it back.
“If you get an official-looking check for more than what you were expecting — say, for $3,000 — the next call you’re likely to get is from a scammer,” the FTC said in a recent press release.
“They’ll tell you to keep your $1,200 payment, and return the rest by sending cash, gift cards or money transfers.”
The IRS will never call, text or email you, so any communication you get along those channels is likely a scam.
“Scammers are sending official-looking messages — including postcards with a password to be used online to ‘access’ or ‘verify’ your payment or direct deposit information,” the FTC added. “The IRS will not contact you to collect your personal information or bank account. It’s a scam.”
If you think something is suspicious, the best course of action is to stop all communication. You can also report the activity to the FTC here.
Stimulus check myths and scams are going to continue proliferating throughout this whole process, so hopefully this helped clear some of the fog surrounding these rare gifts from the government.
Editor’s note: If you’re still working and flush with cash, you may want to invest some or even all of your stimulus check into your future. Here are 4 Stocks to Buy With You Stimulus Check.
