Who Is Eligible To Receive A Stimulus Payment
Generally, U.S. citizens and green card holders are eligible for the stimulus payments. Also, the new law expands who is eligible for a stimulus payment.
In the first round of payments, joint returns of couples where only one member of the couple had a Social Security number were not eligible for a payment unless they were a member of the military. These families are now eligible to receive a stimulus payment, including the additional payment for their dependent children. The new law also made this expansion retroactive to the first round of stimulus payments. If your family did not receive the first stimulus payment because only one spouse had an SSN you can claim the Recovery Rebate Credit when you file your 2020 federal income tax return.
Are The Second And Third Round Of Stimulus Payments Subject To Garnishment
As the COVID-19 pandemic continues to create financial difficulties and hardship for some Americans, Congress has taken additional steps in the last several months to ease this burden for those Americans impacted the hardest. In follow-up to its initial stimulus package issued in March 2020, Congress issued a second round of stimulus checks to qualifying individuals and families in the 2021 Consolidated Appropriations Act in December 2020. In March of 2021, with the pandemic still exacting a harsh toll, Congress approved a third round of economic impact payments through the American Rescue Plan Act .
While the CAA and the ARPA both provide direct assistance to those affected by the pandemic, the acts differ greatly in how they protect the disbursed funds once they are in the hands of their recipients. The purpose of this article is to flesh out this difference in more detail, and to specifically examine the question of whether, under the CAA and the ARPA, banks, financial institutions, and judgment creditors can garnish, levy, or use some other legal process to collect stimulus check monies from individuals to satisfy outstanding debts.
ARPA Funds Are Collectible By Lenders
CAA Funds Likely Are Not Collectible By Lenders
In contrast with ARPA payments, CAA payments likely are not collectible by lenders. The CAA provides that:
Collection Issues with Intermingled ARPA and CAA Funds
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 , 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 .
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Can The Irs Keep Your Stimulus Check
Under the American Rescue Plan, which authorized the latest round of stimulus checks, payments are protected from all offset. … But your check won’t be protected from non-government debt, like medical bills or a credit-card delinquency. Once the money hits your bank account, creditors may be able to seize it.
What To Do If You Suspect The Irs Made A Mistake
Sometimes, the IRS makes mistakes. Recently, the IRS goofed on the stimulus payments of millions of Americans who used tax preparers such as Turbo Tax, Jackson Hewitt, and H& R Block. This massive error left a lot of people wondering where their stimulus payments were. On January 10th, the IRS said that it is reissuing some payments that were sent to the wrong bank accounts.
This is a good reminder that its smart to regularly monitor your bank account for deposits and other activity.
Tip: As an alternative to IRS tools, there are plenty of calculators available to determine whether you should have received a stimulus payment, and for how much, including this one.
Its important to note that its also possible for the IRS to mistakenly make a payment to someone who is not actually eligible. It happened in the first round of stimulus payments, and it probably happened in the second round as well. Read more about the circumstances where you might need to return your stimulus payment.
Recommended Reading: How To Get My Stimulus
Strategies To Avoid Garnishment For Those Receiving Paper Checks
For paper checks, until the check is deposited into a consumers account, their attorney has some time to determine the risk of a garnishment order and also whether under state law a certain dollar amount in the account is automatically protected.
If there is a risk of seizure, recipients of paper stimulus checks can avoid garnishment by cashing them and not depositing them into their bank accounts. The consumers bank may be willing to confirm that there is no garnishment order and to cash the check immediately.
Walmart and many grocery stores or other merchants may accept the federal checks and provide cash back that can be saved or loaded onto a prepaid card. Some banks, including JP Morgan Chase and Wells Fargo, have announced that they will not charge check cashing fees for non-customers that cash stimulus checks. PNC has just announced the same policy. If consumers cash the stimulus check at a bank where they do not have an account, there should be no risk of garnishment.
Where a creditor knows the consumers regular bank account, the risks of garnishment can be reduced, but not eliminated by opening up a new account at a small local bank. Watch out though for extra bank fees for this additional account.
Clients should be warned about expensive check cashing companies. If other means of cashing the check are unavailable, the risk of bank account garnishment must be weighed against the high cost of the check cashing.
How To Protect Your Stimulus Check From Creditors
You’ve likely already thought through the most obvious way to protect your economic recovery paymentâbut you’ll want to protect yourself, too. Here are the steps.
- Opt for a mailed stimulus check when possible and cash it.
- Withdraw any stimulus payment deposited into your bank account as soon as possible. If a levy is in place before you make the withdrawal, you could lose your money .
- Spend the cash on necessary items, such as food, utilities, rent, or mortgage payment, and keep good records.
If the IRS already has your account information, you can expect a direct deposit. You can check using the IRS “Get My Payment” tool. If it prompts you to provide your bank account number, but you’d prefer a paper check, don’t supply it.
Important Tip. Purposefully depriving creditors of payment can be fraudulent. However, you’re entitled to use your assets to provide basic life needs for you and your family. Plus, the purpose of stimulus payments is to lessen the financial impact of the coronavirus outbreakânot to pay down creditors. So while it’s unlikely that you’ll run into a problem, keeping good records will help.
Also, history has shown that when collecting gets harder, creditors become creative. So stay transparent.
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Banks And Creditors Might Be Able To Take Your Stimulus Checks In This Circumstance
With the first stimulus check, private banks and creditors were able to seize your payment to cover an outstanding debt. However, some states, such as California, issued orders forbidding banks and creditors from garnishing your stimulus check. With the second stimulus check, your payment was protected from bank garnishment and from private creditors and debt collectors, according to the text of the law. The third check is also supposed to be protected from bank garnishment, though not from private creditors and debt collectors.
However, there’s one major caveat here. Individual banks can decide whether they want to use your stimulus direct deposit payment to cover overdraft fees, according to a New York Times report. This is because, for most people, their stimulus check is deposited into the same bank account where they also receive tax refunds.
Although for the second check large US banks including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said they would temporarily zero out their customers’ negative balances so that they could access their stimulus money, some regional and community banks still garnished that money to pay overdraft fees, or were considering customer requests on a case-by-case basis, according to the Times. If this has happened to you, you can try contacting your bank to ask for a temporary overdraft waiver, but it may not be granted. This is likely to be the case for a third check as well, Watson said.
Just Because You’re Eligible For A Stimulus Payout Doesn’t Mean You’re Going To Receive It
Over the past two months, the coronavirus disease 2019 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 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.
Also Check: Are Stimulus Checks Still Coming
Finding Out If A Creditor Has A Money Judgment
Most people know whether a creditor has a money judgment against them, but it’s not always the case. Here are a few ways you can find out.
- Check your credit report. You’re entitled to one free copy per year from each of the three major reporting agencies at annualcreditreport.com.
- Research court records for judgments. If you find one, check whether it’s too old to enforce . If it is and the creditor hasn’t renewed it, you’ll be in the clear.
- Check for liens. In some states, creditors must “perfect” lien rightsâor establish their ownership interest in property until a debt is repaidâby filing the court judgment in the recorder’s office or with the secretary of state . If you find a money judgment lien, you’ll know you have a creditor who means business.
Important Tip. Creditors have a limited amount of time to file a lawsuit against you under laws called “statute of limitations.” If a creditor files an action after the limitation period expires, you’ll have to ask the court to dismiss the case by filing a motionâstatute of limitation dismissals don’t happen automatically.
Tips For Protecting Your Stimulus Funds
These economic impact payments are meant to help with living expenses during a turbulent time for the country. If you know you have an account in collections and are worried about your stimulus funds being taken for those rather than your immediate needs, you can take a few proactive steps to help protect the incoming money. A little research and planning can go a long way.
Also Check: When Is The Next Stimulus Coming
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.
If I Am The Custodial Parent And Im Currently Receiving Or Have Ever Received Tanf Or Medicaid For My Child Will I Receive Any Money From A Tax Return Intercepted By The Federal Government From The Noncustodial Parent On My Case
Maybe. Federal law dictates how monies received by a state child support agencyunder the Federal Tax Refund Offset Program are distributed. In Texas, federal tax offsets are applied first to assigned arrears, or arrears owned by the state, and then to arrearages owed to the family. If there is money owed to the state in your case, the intercept stimulus payments up to the amount owed to the state will be retained by the state. The remainder of money will be sent to you, up to the amount of unassigned arrears owed to you by the noncustodial parent.The amount of the money you are entitled to receive will depend on a number of factors, including the amount of the tax refund intercepted, the amounts owed to you in your case, and the number of other child support cases in which the noncustodial parent owes child support arrears.You must also have a full-service case open with the Child Support Division to be entitled to receive any monies from an intercepted tax return.
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Can Creditors Garnish My Stimulus Check
This post was written at 11:15 am on Thursday, April 16, 2020. We believe that it was accurate and up to date as of that time. However, because of the rapid, daily changes in the political and legal climates, we cannot guarantee that the post is current.
Pursuant to the $2.2 trillion CARES Act, the federal government will issue stimulus checks to millions of income-qualified Americans. According to the IRS Economic Impact Payment Information Center, U.S. residents will receive an Economic Impact Payment of $1,200 for individual or head of household filers, and $2,400 for those who are married filing jointly, if they are not a dependent of another taxpayer and have a work eligible Social Security number with adjusted gross income up to $75,000 for individuals, $112,500 for head of household filers, or $150,000 for married couples filing joint returns, plus $500 per qualifying child. U.S. residents will receive a reduced payment if their AGI is between $75,000 and $99,000 if their filing status was single or married filing separately, 112,500 and $136,500 for head of household, or $150,000 and $198,000 if their filing status was married filing jointly.
- Withholding direct deposit information from the IRS so that the IRS will have to issue a paper stimulus check
- Withdrawing stimulus funds as soon as deposited
- Asserting exemptions under state law if an account containing the stimulus check has already been garnished or
- Seeking an emergency stay of any garnishment order.
Some States Are Pushing Back
At the federal level, stimulus recipients aren’t protected from having their stimulus money garnished. But some individual states are stepping up to prevent that from happening.
Governors in New Jersey, Maryland and Washington, as well as state attorneys general in Massachusetts, New York and Nebraska, have all taken action over the past few weeks to help prevent creditors from getting their hands on stimulus funds. New Jersey, for example, secured support from 49 different banks and credit unions to protect stimulus payments in the face of garnishment attempts.
Of course, protection at the federal level would be the most ideal solution to the problem at hand. And lawmakers did fight for that. Specifically, Democratic Senators Sherrod Brown of Ohio, Ron Wyden of Oregon, and Bob Menendez of New Jersey introduced a bill in late March to prevent stimulus garnishment on a widespread level. Republicans, however, shut it down quickly, and no such legislation was passed before lawmakers went on recess last week. This left many Americans vulnerable to having their stimulus funds garnished.
So many people are reliant on their stimulus checks to cover immediate bills, like rent, food, and utilities. Robbing them of those funds could be downright catastrophic. Unfortunately, in most states, there’s nothing to stop that from happening at this point in time.
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Also Check: Stimulus Checks For Social Security
Most Restrictions Put In Place To Protect Your Stimulus Check From Garnishment Don’t Apply To Recovery Rebate Tax Credits
Your first- or second-round stimulus check couldn’t be taken away to pay back taxes or other government debts you owe. Second-round stimulus checks couldn’t be garnished to pay child support arrears or money owed to private creditors or debt collectors, either. But what if you didn’t receive a stimulus check or didn’t receive the full amount and you’re expecting to get the stimulus money your entitled to by claiming the Recovery Rebate credit on your 2020 tax return?
Unfortunately, thanks to a little-known provision in the COVID-relief law passed in December, most of those protections don’t apply to Recovery Rebate credits. So, if you get a refund on your 2020 tax return because of the credit, the IRS can take it away to pay any child support, state taxes, or other government debts you owe. Banks and other creditors and debt collectors may be able to snatch your refund, too.
The IRS is aware of this situation and has provided some limited relief . Congress could step in and change the law, too. But for now, garnishment of any tax refund you get this year is possible even if the refund is entirely based on the Recovery Rebate credit.