Why your stimulus check might be less than you expect

The federal stimulus payments now going out to U.S. households are aimed at helping families weather the financial impact of the coronavirus pandemic. But some taxpayers may find their payouts aren't what they expected, according to the IRS. 

About 20 million taxpayers still await their money, while the agency has already delivered payments to about 130 million taxpayers. The IRS is sending $1,200 to single taxpayers earning less than $75,000 and $2,400 for married couples who earn less than $150,000. 

Given soaring unemployment around the U.S. and the usual challenge of paying the bills, some taxpayers have told CBS MoneyWatch that not knowing when the checks will arrive is only adding to the stress. Yet while disbursing these so-called Economic Impact Payments may seem simple, the effort has been far from straightforward. Some consumers have reported receiving checks for deceased relatives, for example, while others got confusing messages from the IRS “Get My Payment” website. 

On top of that, determining how much households should receive may not be as clear as it appears at first glance. That's partly due to the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act, which authorized the stimulus payments but also includes a handful of exclusions that may impact how much people get. The IRS also says that checks may be garnished due to child support or other debts, which could lower payouts. 

Even without exclusions or garnishments, the checks may not go far for many American families, shows a LendingTree analysis of income and expenses in almost 100 U.S. cities. The typical monthly expenses for a two-parent, two-child household stands at $7,531 across those cities. That means a $3,400 stimulus check for a family of four— $2,400 for the parents and $500 for each child — would cover less than half of their monthly budget.

Here's why your stimulus check might be lower than you expect:

You haven't yet filed your 2019 tax return

The IRS will base your stimulus check on either your 2018 or 2019 tax return. But because the tax agency delayed the filing deadline from April 15 until July 15, some taxpayers haven't yet filed their 2019 returns. In that case, the IRS will base your payment on your 2018 return.

That may result in the IRS calculating your payment on income and family size that doesn't reflect your current circumstances. For instance, if you became a parent in 2019, the child wouldn't be reflected in your 2018 tax returns because he or she hadn't been born yet — which means you won't receive $500 for that child. 

Likewise, the IRS will base your payment on your 2018 income, which means the check won't be influenced by whether your earnings rose or fell in 2019. That could result in higher or lower payments for households, depending on whether their income was above or below the income thresholds of $75,000 for single taxpayers and $150,000 for married couples. 

Take a single taxpayer who hasn't yet filed her 2019 tax returns and who earned $90,000 in 2018, but whose income fell to $75,000 in 2019. The IRS would calculate her payment based on the 2018 income, which would reduce payout to $450. That's because the amount is lowered by $5 for every $100 earned above the income thresholds, until the payment is phased out for single taxpayers who earn more than $99,000 and married couples who earn more than $198,000.

However, not all is lost: The IRS says taxpayers will be able to adjust their claims in their 2020 tax returns and recoup the extra stimulus money. For instance, that family with a new baby would receive the $500 next year when they file their 2020 tax returns, and the taxpayer whose income declined would also receive the difference when she files next year.

Your child doesn't qualify for the $500 payment

Families with children are entitled to $500 for each one — with several exclusions, which may take some households by surprise. To qualify for the $500, children must be:

• Younger than 17 for the tax year that the IRS uses to determine the payment. This means many high school seniors and even some juniors don't qualify for the payment.
• Living with the parents more than half the year, and the parents must provide at least half their support.
• Claimed as a dependent. 
• A U.S. citizen, Green Card holder or qualifying resident alien.
• Claimed as dependents by parents who are either U.S. citizens or Green Card holders.

The child must also have a Social Security number, the IRS noted on Monday. The issue of children's eligibility has drawn fire on a number of fronts, from parents who are upset that older children aren't included to families in which one parent is an immigrant and lacks a Social Security number. That's because under IRS rules their children — even if they are U.S. citizens — aren't eligible for the payments. 

You're a college student and a dependent

If you're in college but claimed as a dependent by other taxpayers, such as your parents, you don't qualify for either the $500 child payment or $1,200 for yourself, the IRS noted.

There's a chance to claim the $1,200 next year, however. If students file their 2020 taxes and aren't claimed as a dependent by another taxpayer, they'll receive the $1,200 when they file their returns next year, the IRS said.

You're an adult but claimed as a dependent

Adults who are claimed as a dependent by another taxpayer, such as older Americans who are claimed as dependents by their adult children, don't qualify for the $1,200 payments.

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Yet as with college students in the example above, adults in this situation can still receive the $1,200 next year when they file their 2020 tax returns and if they aren't claimed as dependents for that tax year.

You owe child support or private debts

If you owe back taxes to the IRS or another tax agency, your stimulus check won't be impacted. But your payment might be lower if you owe child support or money to other creditors. Taxpayers who are behind in their child support payments will have their checks reduced by the amount they owe, the IRS has said. In this case, the Bureau of the Fiscal Service notify taxpayers if their checks are being garnished.

Debt collectors are also allowed to garnish the checks, according to the CARES Act. That means anyone with a judgment against them for credit-card debt, medical debt or any other kind of private debt can lose their stimulus money to a debt collector. However, some states are blocking debt collectors from dipping into people's stimulus checks, including Massachusetts and Ohio.