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By Rocky Mengle, Tax Editor
| May 13, 2020Updated May 15, 2020
Here we go again! Congressional efforts to pass another economic stimulus package officially began when the House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. Perhaps the highest-profile provisions in the bill are those concerning a second round of stimulus checks. There was a lot of buzz about $2,000 stimulus checks each month, but in the end the House opted for a much more modest proposal. In fact, the second round of stimulus checks called for in the HEROES Act looks a lot like the first round of $1,200 checks authorized by the CARES Act—but with some important tweaks (and even some changes to the CARES Act payments).
The HEROES Act, as it stands right, basically has no chance of becoming law. It's considered dead on arrival in the Republican-controlled Senate. However, at least a few proposals in the current bill could survive the coming political slugfest and eventually land on President Trump's desk—including the new stimulus check provisions. The general idea of having more direct payments has bipartisan support, and the HEROES Act proposal is not as costly as other stimulus check options.
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We don't know yet what Democratic and Republican lawmakers in the nation's capital will eventually do. They could negotiate a final version of the HEROES Act, craft a different bill, or become stuck in typical Washington gridlock. But while we wait for further action (or inaction), let's take a look at the proposed second-round stimulus checks and see how they compare with the first round of payments.
Like the first round of stimulus checks, the HEROES Act calls for a $1,200 payment to each eligible American ($2,400 for married couples filing a joint return). However, you would get an additional $1,200 for each dependent (for up to a maximum of three dependents). So, for example, a married couple with three children could get up to $6,000.
For the first round of stimulus checks, an extra $500 is allowed for each child age 16 and younger. So, if enacted, the HEROES Act plan would provide more money for each additional family member and allow these extra payments for older children, elderly parents living with you, or anyone else who you support and can claim as a dependent.
Again, like the original stimulus checks, the HEROES Act stimulus payments would be phased-out for people with higher incomes. Payments would gradually decrease to zero if you're single, married filing a separate tax return, or a qualifying widow(er) with a modified adjusted gross income (MAGI) above $75,000. Married couples filing a joint return would start to see their stimulus check shrink if their MAGI exceeded $150,000. For people who claim the head-of-household filing status, payments would be reduced if your AGI tops $112,500.
This phase-out scheme is slightly different than the one used for the first round of payments in that a modified AGI is used to measure income. Under the HEROES Act, MAGI would generally equal adjusted gross income plus any amounts excluded from taxable income as foreign earned income or income from a U.S. territory. For most people, this change would not make a difference in the amount of their stimulus check.
As with the first-round payments, second-round stimulus checks would actually be advanced payments of a 2020 tax credit. If the second-round payment is greater than your 2020 credit, you wouldn't have to pay back the difference. On the other hand, if your second payment is less than your 2020 credit, you would get the difference back as a tax credit when you file your 2020 return.
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The IRS would first look at your 2019 tax return for your filing status, MAGI, and information about your dependents. If you didn't file a 2019 return, they would then look at your 2018 return if you filed for that year. This is the same approach authorized by the CARES Act for the first round of stimulus checks.
If you didn't file a 2018 or 2019 return, but you receive Social Security, Supplemental Security Income (SSI), railroad retirement benefits, or veterans benefits, the IRS would get the information it needs from the Social Security Administration, Railroad Retirement Board, or Department of Veterans Affairs. While the IRS eventually followed this approach for the first-round payments, the CARES Act specifically authorized the IRS to get information only from the Social Security Administration.
Anyone who could be claimed as a dependent on someone else's tax return would not get a second-round payment under the HEROES Act. They also don't qualify for a first-round check. However, as mentioned above, the person supporting a dependent would get an extra $1,200 under the HEROES Act, which isn't the case with first-round payments unless the dependent is 16 years old or younger.
Nonresident aliens would not qualify for a second-round stimulus check, either. This exclusion applies for the first round of payments, too. Generally, a nonresident alien is someone who is not a U.S. citizen, doesn't have a green card, and isn't physically present in the U.S. for the required amount of time.
For the first round of stimulus checks, you must have a Social Security number to get a payment. However, you would only need a Taxpayer Identification Number (TIN) to get a second-round payment under the HEROES Act.
By allowing TINs instead of a Social Security number, the HEROES Act would allow certain people who are not U.S. citizens and who can't get a Social Security Number to receive a stimulus payment.
If you owe child support, the IRS can use first-round stimulus check money to pay arrears. That won't be the case for second-round payments under the HEROES Act.
In addition, second-round stimulus money wouldn't be taken to pay back taxes or other debts owed to the federal or a state government. (That's also the same rule for first-round stimulus payments.)
The HEROES Act specifically states that second-round stimulus checks would not be subject to garnishment by creditors or debt collectors. They would not be lost in bankruptcy proceedings, either.
This is in contrast with the CARES Act, which doesn't provide similar protections for first-round payments.
President Trump's name (but not signature) appears on first-round paper stimulus checks issued by the IRS. The HEROES Act would specifically prohibit the name, signature, image or likeness of the President, the Vice President or any elected U.S. official or cabinet level officer from appearing on second-round checks.
If the HEROES Act is enacted, some of the CARES Act provisions for first-round stimulus checks would be modified. For example:
If one of these changes increased the amount of your first-round payment, the IRS would have to send you a check for the difference.