Stimulus Law: When Will The Second Check Arrive?

The second stimulus package was a topic of discussion in 2020, with the Democrats proposing a $3 trillion package under the Heroes Act and the Republicans proposing a $1 trillion package under the HEALS Act. The Democrats' proposal included stimulus checks of $1,200 for individuals, $2,400 for couples, and $1,200 per child, while the Republicans' proposal included stimulus checks of $1,200 for individuals, $2,400 for couples, and $500 for dependents. The timing of the second stimulus bill was dependent on negotiations between the Democrats and Republicans, with the best estimate being early August 2020. However, it is important to note that the information provided may not be up-to-date and the status of the second stimulus package may have changed since then.

The second stimulus payment amount

The Republicans, on the other hand, initially proposed a lower threshold of $40,000 instead of $75,000 for individuals, but this idea seems to have been abandoned. The final amount of the second stimulus payment will depend on the negotiations between the two parties and the signing of the bill into law by the president.

The second stimulus payment is intended to provide economic relief to Americans who have been affected by the COVID-19 pandemic. The payments are designed to help individuals and families cover essential expenses and boost the economy. The specific details of the second stimulus payment are still in flux, but it is expected to provide a similar level of support as the first payment.

The income requirements for eligibility remain largely the same as the first stimulus payment. Individuals earning less than $75,000 and married/joint filers earning less than $150,000 will be eligible for the full amount. The stimulus payment amount will be reduced by 5% of the adjusted gross income above these limits.

The second stimulus payment is designed to provide immediate financial assistance to those who need it the most. However, there are concerns that the amount may not be sufficient to address the economic challenges faced by Americans due to the pandemic. Some lawmakers have proposed extending the benefits or providing additional support to vulnerable groups.

The timing of the second stimulus bill is dependent on the negotiations between the Democrats and Republicans, resulting in a final bill that is then signed by the president. The best estimate for the passage of the bill is early August, as the Senate is scheduled to go into recess on August 7th. If the bill is not passed by then, there may be a delay until after Labor Day.

Income requirements for eligibility

The Internal Revenue Service (IRS) has already issued all first, second, and third Economic Impact Payments. However, some people may be eligible to claim a Recovery Rebate Credit for tax years 2020 or 2021 if they did not receive the full amount of their stimulus payments. This includes people who missed one of the COVID stimulus payments or received less than the full amount.

In December 2024, the IRS announced it would be sending out special payments of up to $1,400 to eligible taxpayers who did not receive the full amount of their pandemic stimulus payments. These payments are automatic, and eligible taxpayers do not need to take any action to receive them. The IRS will send letters to notify eligible taxpayers of the special payment.

The special payments are being sent to taxpayers who filed a 2021 tax return but left the data field for the Recovery Rebate Credit blank or filled it out as $0 when they were actually eligible for the credit. The payments will be made through direct deposit or by paper check and should arrive by late January 2025.

For those who have not yet filed their 2021 tax returns, it may still be possible to receive the money. Taxpayers must file a tax return and claim the Recovery Rebate Credit by the April 15, 2025 deadline, even if their income was minimal or nonexistent.

The amount of the stimulus payments that taxpayers received was based on their income, tax filing status, and number of children or qualifying dependents. In March 2020, eligible individuals received up to $1,200 per income tax filer and $500 per child under the CARES Act. In December 2020, eligible individuals received up to $600 per income tax filer and $600 per child under the Consolidated Appropriations Act. In March 2021, eligible individuals received up to $1,400 per income tax filer and $1,400 per child under the American Rescue Plan Act.

The size of the stimulus check decreased based on income for individuals who earned more than $75,000 based on their 2019 tax returns (or their 2018 returns if they had not filed for 2019 yet). The payment for individuals shrank by $5 for every $100 earned over $75,000. For married couples filing jointly, the reduction started once they earned more than $150,000, and for heads of household, it started at $112,500. Individuals who earned more than $99,000 and couples who earned more than $198,000 jointly did not receive checks. The income cut-off for heads of households was $136,500.

Extension of federal supplemental benefits

The $600 federal supplemental benefit for laid-off employees was set to expire on July 25 or July 26, 2020, depending on the state. Democrats wanted to extend these benefits, but Republicans complained that the amount was too high and discouraged workers from returning to work.

The Republican stimulus package, proposed on July 27, 2020, offered a $200 weekly supplement to state unemployment payments. This amount would later be replaced with a more complex program that would pay workers 70% of the income they earned before losing their jobs. States would be given two months to implement the 70% formula, which many believed was not feasible, given the volume of unemployment claims.

The issue of federal supplemental benefits was one of the most contested issues in the stimulus package negotiations. However, it was expected that some compromise would be reached in the coming weeks.

On July 27, 2020, certain California legislators indicated that they would pass legislation to fill any gaps in the $600 unemployment benefits if Congress approved a smaller amount. This additional benefit was considered crucial to prevent an economic collapse and ensure that working families could keep their homes and pay for essential items.

The original CARES Act provided for a $600 federal supplemental unemployment benefit for independent contractors, freelancers, and gig workers who were negatively impacted by Covid-19 and were not eligible for standard unemployment insurance benefits. This aid was scheduled to continue until December 31, 2020. However, there was uncertainty about how these workers would be treated in the final stimulus bill.

Payroll Protection Program (PPP) expansion

The Paycheck Protection Program (PPP) is a loan program that has been enormously helpful to small businesses by granting favourable forgivable loans. The PPP was due to expire on 8 August 2020 for any new loans, but Republicans proposed an expansion of the program as part of their new stimulus package. This included a streamlined forgiveness process and a provision that would allow smaller businesses to take out second PPP loans.

The expansion of the PPP was included in the $900 billion relief package proposed by Congress in response to the economic hardship faced by many Americans due to the COVID-19 pandemic. The bill, which was around 5,593 pages long, was not signed by President Trump before he left office, but it is expected that few measures in the bill require his approval.

The latest iteration of the PPP includes more stringent qualification requirements than the original program. Changes to the PPP under the new stimulus and relief package include:

• Additional authorised expenses
• Flexibility in selecting a covered period
• Simplified forgiveness application for loans up to $150,000
• Borrowers who returned funds can reapply
• The maximum allowable second-draw loan amount under the program’s new version is capped at $2 million (compared to $10 million under the original PPP)

For those businesses that have yet to receive a loan under the PPP, the ability to apply for round one financing will be reopened, with the qualifications and rules for that program remaining largely the same.

Student loan forgiveness

The Act initially proposed $10,000 of forgiveness for federal student loans and a further $10,000 for private student loans. This was later amended, with the final proposal narrowed to only those borrowers facing significant financial struggles. As a result, if the HEROES Act were to become law, millions of student loan borrowers would not qualify for debt forgiveness.

President Biden's separate student debt forgiveness plan is also facing legal challenges in the Supreme Court, with two borrowers claiming that Biden's plan does not provide enough debt relief, and six conservative states arguing that it will result in lost revenue for a state-created entity servicing student loans.

Despite these setbacks, there is some positive news for those seeking student loan forgiveness. The Covid-19 stimulus bill, passed by Congress in March 2021, included a provision that any student debt forgiven between December 31, 2020, and January 1, 2026, will not be taxed. This is significant because, under federal law, forgiven debt is typically treated as taxable income. Additionally, President Biden has proposed wiping away $20,000 of debt for borrowers who used a Pell Grant to pay tuition and $10,000 for most other borrowers, with income limits in place.

While the future of student loan forgiveness remains uncertain, it is clear that it is a priority for many, with ongoing discussions and legal challenges seeking to address the issue.

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