#040: Stimulus Checks Explained + Tax Questions Answered

As of March 26, 2020, the U.S. Senate has passed legislation that would include a one-time payment of $1,200 to Americans earning less than $75,000. Income levels will be calculated based on 2019 tax filings. If you have not yet filed your taxes, your stimulus check will be dependent on your 2018 tax filing.

Larry Campbell, a CPA at the San Diego-based Lavine, Lofgren, Morris & Engelberg, LLP, joins the Talk Wealth To Me crew for an explanation on the stimulus checks set to go out to American consumers.

How Much Money Should I Expect?

• Americans who earn less than $99,000 but more than $75,000 will be given a smaller one-time payment.
• Individuals earning $99,000 or more will not be given a one-time payment.
• Married couples filing jointly who earn a combined $150,000 or less will be given a $2,400 one-time payment.
• Individuals and couples with children could qualify to receive additional financial assistance.

Some Important Notes & Links:
*To check the status of your stimulus check, please visit the new Get My Payment website from the IRS. You can access that page here. Please note that the website is experiencing a high volume of traffic, please refresh the page or wait a few minutes and check back.

*If you do not file taxes, there’s a direct deposit portal now available for you to input your information so you can receive a stimulus check sooner than later. You can access the portal here.

*As of April 2, the IRS reported that Social Security recipients no longer need to file 2018 or 2019 tax returns in order to receive their COVID-19 stimulus checks.
 

About the Show
Comments, questions or suggestions for the show? Email us at talkwealthpodcast@gmail.com.

To learn more about DebtWave Credit Counseling, visit our website or connect with us on Facebook, Twitter, Instagram, and LinkedIn.

To learn more about the San Diego Financial Literacy Center, visit our website or connect with us on Facebook and Twitter.

Transcript

Intro:   0:09
Welcome to Talk Wealth to Me, a safe space podcast where we chat about anything and everything related to personal finance.  

Felipe Arevalo:   0:19
The information contained in this podcast is for educational and entertainment purposes only. It does not constitute as accounting, legal, tax or other professional advice.  

Chase Peckham:   0:31
Hello and welcome to another edition of talk Wealth to me. This week. We are welcoming back Larry Campbell, managing partner at Levine, Lofgren, Morrison, Engelberg, A. CPA. Here in San Diego, California, to discuss what the CARES Act means to us individually. Those individuals who have lost their job, What does it mean to us? We hear all about stimulus packages. We hear about tax deadlines being pushed back. What does that all mean? To us. And thank goodness we have Larry Campbell to discuss all of that with us. Yeah, let's touch on this.  

Larry Campbell:   1:07
Yeah, so a couple of bigger ones. One, um, they added a new charitable contribution so a lot of people with the new tax law had not. You know, most people aren't itemizing the deduction, so if you want to give money more money to charity, they've added an extra $300 deduction. It's not big But at least it incentivizes people right now to go out and support different people throughout the community. Um, retirement distributions from retirement. You can take money out of your retirement account and not pay a penalty of up to $100,000. But once again that will free up some people to take money if they need to live on and not have to pay a penalty for taking that money out early. So that would be a significant benefit to somebody who is in a desperate need that maybe they're not getting their funds they need. And that's their only opportunity. That at least won't put a, uh, owners by adding a penalty on top of that.

Chase Peckham:   2:01
And they don't have to pay that back at any specific time?

Larry Campbell:   2:04
Uh, well, it would be taxable income when they take it out. If if they keep taking out, they keep it out for more than 60 days.

Chase Peckham:   2:12
Okay, which they probably will.

Larry Campbell:   2:14
Yeah, well, you probably will more likely, but the ideas you're not getting that extra on, penalty on top of that, which, you know could be over 20%. So when you combine, um, federal and California. So, um, you know, there's definitely some other smaller ones that are out there, but I think for the most part, you know, it's it's just giving this people the opportunities that they need and to free up funds. Um, that helped them. They're gonna get through this next couple months and then hope with your end of the year

Chase Peckham:   2:43
And how much? How much do you think it's gonna impact the deadline being pushed back to July instead of April 15th? Is that gonna be? Is that just the pure fact of giving people relief of not having to pay at this time?  

Larry Campbell:   2:57
Yeah. I mean, I think that's a pretty significant benefit, right, Because you can, um, yeah, I guess you don't have to pay the tax now. So, you know, since you have those funds available to you to live on, um instead of paying your taxes, eventually you'd have to pay, though. That's the thing. So that's the balance. That's my concern is you know, my client's going Oh, great I don't have to pay. So then they spend the money, then we come in July and all of a sudden they don't have the money to pay the tax now, Um, which, unfortunately, which I'm sure we all know everyone treats things and has a different finances and does well, um, with those finances. But, you know, I think that the government's gonna give that flexibility. Um, so if they can't pay the probably allow them to, have, you know, the building to make payments and create their own payment plans in the future, But definitely. Yeah, this There's no way people would have the ability to put all their majority of this country could have ability to get all of their information together to file and pay the taxes by April 15th. Just, you know, you can't You can't tell everyone to stay home and not work. Um, and then tell them you have to You have to continue to do all these things without all the resources to do it. So it was great to finally see them come forward and finally do that. Um, what I don't know is what you know, when the questions I get now is what's the extended due date? They're gonna be all right. Is it still in the past You could extend from April 15th through October 15th. And now, you know, uh, we don't know yet if they're going to just extend it from July to October or they're gonna extend even further past October to give people more time. I think, as we get to the next month, with what we have more clear understanding of when we're gonna come out of this, Um, and when we get back to kind of get in the system moving and then they'll probably adjust as needed.

Chase Peckham:   4:43
But they can't possibly take it into 2021 can they?

Larry Campbell:   4:46
I Yeah, let's just say I hope that doesn't look. Let's say I hope that's not an option, because that happens. Then we're really in trouble. That means we could, you know, that means we're backing up and running as a society. And we're not going until late into the summer and into the fall. Um, so I think, let's just let's hope that that's not an option.

Katie Utterback:   5:06
Well, this is just making me wonder, too. They were talking about that. A second wave of a quarantine could come this fall in October, November, December. I mean, do we need to start preparing financially, in the form of taxes or whatever we might need now for that?

Larry Campbell:   5:25
It's a good question. Um, I think it's hard, which is hard to answer because we don't know, you know?

Katie Utterback:   5:32
Sure. Yeah. We don't know this one's endings. Yeah, Yeah.

Larry Campbell:   5:35
I mean, obviously, I would say the answer to that is save as much as you can now, right? Uh, cut back on your on your nonessential expenses. Pay, only what you need to pay. Um, you know, obviously, unfortunately, maybe some of you have set aside money for travel or things that you're probably not gonna be able to do, um, this summer this year. So hopefully that will help you a little bit, Um, or you've been able to go back and get refunds from travel you already pre-paid for. Um, you know, I think that would be the my my comment. Everyone is we're not out of this. We don't know when we'll come out of it. So continue to keep the bootstraps on. And and, uh, you know, do the minimum that you can to get through this. And then as we see more information than you can start adding, you know, opening up that door of a game plan. Right? Um, but you know what? Let's you know, Like I said, let's hope we don't need the ultimate rounds of stimulus. Let's hope we get through this and back up, right?

Chase Peckham:   6:30
Yeah. Let's hope that Ah, we have. Are those incredible scientists and, ah, technology companies were figuring out that there'll be a better way to combat this thing by the time we get to You know, next Christmas, I would hope that would be that would be the plan. Um, Larry, on the other side of that, how are the state's handling income, taxes and those kinds of things? Are they following the federal guidelines? For the most part,

Larry Campbell:   7:02
Yeah. For the most part, you know, each states affected differently. Um, So there has been some delay in the beginning, you know, that the major states affected came on board and matched federal some other states of lag. At this point, I don't know exactly which states have done exactly what, but for the most part, the major states, uh, you know are following in line and extended both the payment and due date to July. As of today, um, you know, they don't necessarily haven't enacted a lot of the tax changes yet. Um, some states have automatically, uh, you know, um, you know, do whatever federal does in certain areas, like appreciation. Some states have their own rules. Um, all those had have yet to be determined yet, Um, you know, like, California's came out with just a couple areas that they were in agreement on federal, and one of them was, you know, the waving the penalty for taking out distributions from your time recounts of They're gonna wave California's as well, but they did say that they're not going to follow the carry back of the net operating loss. So, in a sense, for California, you won't be able to get that benefit, uh, for carrying back that loss. So and every state is gonna have their own different rules and different programs. And, um, you know, obviously they're gonna have to figure out what they're gonna do is well, uh, through this.

Katie Utterback:   8:27
What's a good resource, Larry? For people in other states outside of California. Who can't just just call you directly. Where can they go to find out? I guess the tax information for their state.

Larry Campbell:   8:41
Yeah. The best is the department of revenue for each state. California. That's called the franchise tax board. So you go to their Web sites. The websites are great. I mean, be honest. A lot of the information my clients ask me. I'll go straight to the website and it's right there. It's just understanding where to find it. That's the hard part. Um, you know, But I would say that I'd be the first steps The Web sites have been having a Most of them set up a specific area on the website just for the Coronavirus adjustments. And hey, this is where you can find your information. And so it's a little easier than normal to find that. So that would be My first recommendation is, is, uh, if you don't know the Web site, you can use Google. You know, Pennsylvania Department of Revenue. That usually seems to be the key terms there. But, you know, you write your checks due to the States that it's the same company, and that would be my first starting point. Um, of where you can get the best information.

Chase Peckham:   9:34
Okay, here's the question that everybody is really way they really waiting on for those that have filed their tax returns and are due to get a refund. Do we see that happening through this?

Larry Campbell:   9:49
Yes. Yeah. No, Definitely. Uh, everything's changed as I haven't seen any major hiccups in that whole process. Um, you know, my firm's been up and running once we able to switch to working remote so we've been. You know, we've been kind of lowering the hours to give. Make sure that everyone's, you know, not physically worn down, and so they can stay healthy and make sure that their immune system remains high through this whole process. But we've been filing returns for the last month. So in most, most of those we've been focusing on clients that are looking for refunds or, um, you know, they need to file, too. See, they qualify for the the, uh, um, $1200 check that will probably talk about her in a second. So they need to get a return in, because maybe their income is lower in 19. Then it wasn't 18 so they need to get a return in file. Um, and so we've been doing that, and I haven't seen any delays. Major delays, it seems, with small delays but nothing out of the ordinary since that. So I'll see that. I think that will continue. IRS is up running full time. Um, there are obviously a big straight on that on the department through all this, but, uh, you know, hopefully we won't see any major delays to that process.

Chase Peckham:   11:00
So I guess that's a great segue way. We've heard a ton about stimulus checks since about the time we started hearing about Italy in the in the case that we too as a society could start having to stay in our homes. Ah, give us the background on this stimulus check. Who qualifies? Who doesn't, Um and have they really figured that out Completely yet.

Larry Campbell:   11:28
Yeah. I mean, I think it's it's definitely not an easy, uh, determination. But for the most part, I mean, you know, depending on, um, single or married, there's our income thresholds anywhere between75,000 - 140,000. I think of the numbers, remember? Exactly, But if you if you're, uh if you if you filed it based on your 19 tax return would be the starting point, so that would wear where they look. Um, deceive what you're a G. I adjusted gross income. Um, And if you're, uh, if you're below that, then you would qualify for its $12 per person for married. You get $2400. Um, if you didn't file 2019 they would look back on your 18 return and look back and see what did you qualify? Then what was your adjusted gross income? adjusted gross income. Um, were you claimed by your parents or your filing single, uh, married. Whatever that maybe we'll look back there. So that's why a lot of what we've been doing now is making sure that our clients are set up to get the, um, stimulus check sooner than later. Um, the one thing about this is it's not a so one of things I've always had that I've had the unique to the clients is let's say we don't have 19. We haven't finished 19 yet. We're not gonna finish it. And they would qualify 19 where they didn't qualify. And in 18. And so, um, so maybe they really wanted file 19 ago. You're not losing out on the money. They're still gonna get the stimulus payment. I'm assuming that that in 2020. They qualify because it's really a 2020 calculation, and the idea is, if you qualify in 2020 it's actually going to credit on your tax return for 2020. You know, just get the money later, right? You'll get a refund when you file. Obviously, that's a year from now. That doesn't help a lot of people, but it's not like it's lost forever. You still have that one. Last chance is, if you know your income down is down in 2020 you'll be able to get that that credit eventually. Um And so, you know, I think the idea is just getting people who need the funds today, Uh, t get that money in their pocket. Um, unfortunately, this will know I've heard is, you know, people who are set up for direct deposit of the ones getting their money right away, Probably the next two or three weeks. Um, but it's when I have initially heard is they weren't thinking that people who were gonna get a check wouldn't get it to till the end of the summer, Obviously, and I know the administration was not happy about that answer. And so I would imagine they're going to spend some Resource is here to make sure that those checks get out faster. Whether it's hiring people moving around. People in IRS to help process those faster. Um, I would imagine we'll see a change in that baton of that day pre pretty soon,

Felipe Arevalo:   14:18
And it could be something where the those who are doing Ah, the paper checks. They're not direct deposits that may skew more towards some of the populations who are more affected. Some, maybe, like elderly. Or you know, something like my parents, who doesn't wanna embrace technology fully and decides? No, I'd rather have a check so I could walk into the bank. Um, who are, you know, in their sixties and it skews more in the direction of some people who may need it even more? And there's a delay that could be dusting for some of that. Some of the individuals

Larry Campbell:   14:56
I 100 percent agree with you, and you're in your 100% right. I think the reality is the people who don't have direct deposit or don't use it. Probably there's a reason, right, and either, um and and they probably need it more than the person who does on. That's just unfortunate, But this is the reality of our government. Uh, when you get to that size, it just takes longer to do things. And you can't you know, um, you know you you know, that's why you hear it just takes when you get to certain signs, it just takes longer to go through the process of putting out the checks and making sure they're going to the right person and all those things. And hopefully they find a better way to do that. Um, and hopefully at the local levels, they as we talked earlier, that we can find some ways to get people that assistance in the next month to get him to what I check comes in to help them, Um, you know, the day to day basis

Felipe Arevalo:   15:48
and is it something there was originally with those even slightly older demographic where there may be only source of income in Social Security, So their taxes or differently, May I have to file taxes? Um, the individuals really there's still eligible, but is there some extra step? At some point, there was an extra step They have to take. I think that step was then removed.

Larry Campbell:   16:15
Yeah, correct. In the beginning, they were they originally recommended for people who don't file to file especially so security being than probably number one reason for that. Um but then, uh, once again, this administration stepped in and waive that requirement. So they're gonna match up people who get so security to make sure that those people, obviously we'll get checks as well. So if you get so security and you don't file, they're gonna match that up and then they'll send you a check. Once again, That takes a long time to D'oh. There's probably a 1,000,000 people that are probably in that situation. And so you've got to go through each one of those and determine out, but more likely those people. But I haven't heard whether you're set up for direct deposit. So security, maybe that'll come quicker. Reverses a check. Um, you know, so I think that able it all depends on how your situation is.

Chase Peckham:   17:04
Larry, what about those people that are basically getting into the workforce for the first time? So they currently are working. They were making a paycheck, and in going on but they don't have a history of working to file that and didn't file a tax return. What about those individuals? Do they get lost in this, or do they just wait to 2020 and hope?

Larry Campbell:   17:27
Yeah, Uh, as right now, I think it's waiting to 2020 and hoping, um, you know, we're trying Thio, um, you know, like, the first thing is looking to file 19. Um, I have heard some rumblings of them setting up a website with the I. R s for people to kind of go on there and report things. You know, um, one of the things that I've heard is maybe adding a website where you can add your direct deposit information so that maybe you get your cheque quicker. That might be a solution to this S o. They are still looking at doing different things. Now, those people that these exceptions, even though the large exceptions there, they're they're not the majority. Um, help those people. And I think you know, they'll keep They'll keep coming up those ideas, and I feel like they're trying it just it's just hard. So,

Chase Peckham:   18:14
for instance, if if they showed, if there was it. Let's just say a recent college graduate and he's working at your firm. And he's been paid consistently over the last six months. Could he get information from HR to prove that he had been making an income?

Larry Campbell:   18:29
Yeah. I mean, we could obviously have your pay stubs and things like that. I'm not sure they would go that far. At this point.

Chase Peckham:   18:34
That might be a little tedious.

Larry Campbell:   18:36
Yeah, that might be just too hard to figure out. Um, you know, I think the biggest thing I've seen done is, you know, it's a someone who graduated last year. They were student. They were filing with their parents, and now they have their own. Um, you know, we've even amended returns to take people off. You know, the returns in order to get their 1200 bucks. Um, you know, we've done things like that, so, yeah, you know, everyone's got a different situation, and there are some ways to get around it, But some of them, you just gonna have to wait. Unfortunately,

Chase Peckham:   19:07
Yeah. I mean, nothing is gonna be 100% ever act. Is the stimulus test taxable?

Larry Campbell:   19:14
The current plan is for it to not to be taxable. Um, definitely. If you qualify for it and you deserve it and you get it, it's not gonna be taxable. Um uh, and that's been very clear. It's a refundable kind of tax credit where they set up. I will say it's not 100% clear yet, and I heard conflicting answers on this and I've read about because the law doesn't say is the question is that you get your cheque. So let's say you qualify in 19 or in 18 you got your check, but then you get to 2020. For some reason you don't qualify in 2020. What they haven't said is whether you have to pay that back right, because in a sense, that's what you're kind of you're getting. The refund is based on 2020 numbers, right? Um, in the past, when we've done this back when George W. Bush did this with 2008 it was it was like a tax credit that you did have to pay back if you didn't qualify for it. This one does not does not currently set up that way, and I hope they just say, well, if you got it, you got it. And let's not worry about clawing it back at this point. Um, but, you know, I don't know that with 100% certainty, but I would say for the most part, I would go under the assumption that you know you're not going to pay it back. Um, and at least it's not taxable for sure. Dame to that question.

Katie Utterback:   20:32
Do you have advice for for those of us who may still be employed and qualify for the stimulus check? What's the best use of that money?

Larry Campbell:   20:40
Great question. I would say. You know, I think back to what we talked about previously. Its focus on the essentials. Right? Um, the things that are getting through the daily basis and, uh, you know, doing what you need to do to survive, you know, whether you're paying rent or if you if you need to be in your car, you know, taking care of your car, obviously Personally, carry yourself healthwise through this I think is important. Um, I think a lot of this thing this check is not necessary meant to be anything of significance. It just meant to lessen the pain on get a few dollars. Get people's hopes up. I don't think $1200 I know for some people will go a long way. But I think for the most part, it just kind of, you know, getting to the next month or the next, you know, until we get it back open running here. Um, yeah. I focus on the essentials and be part of your normal plan for cutting back and just put it where where you feel is best.

Chase Peckham:   21:40
I think that's sound advice. Everybody's situation's gonna be uniquely different. What about those that have said? And I've heard Larry and you tell me what you think. I've had people that I've spoken to professionals that have said that Well, if if I somehow, if I get this check or I'm eligible to get this check, I'm working. Can they donate that, or should they don't at that or hold on to it?

Larry Campbell:   22:02
As far as the check. Yet you could do whatever you want with it, right? I think everyone is gonna have your different perspective, um, of where they want it. If you if you're this is excess money for you and you, you know, you know you can find a way where you think is best, whether it's helping out a family member, whether it's, uh, giving an extra large check on ah, tip on a on a dinner. I take out dinner because you're helping out your local hospitality or restaurant. Um, you know, whether it's helping out another employee, you that maybe as a different situation than you do. I think all those options air there. Um and, you know, I think, ah, you know, giving back I think right now is probably the one thing to focus on it if you have that opportunity, Um, because now is the time to do it. Don't wait later on, because now this when the money needs to be out there and helping people get through this, um, given money later on. Yes, it helps. But, you know, it's ah, unless significant, you know, once you're back up and running.

Chase Peckham:   23:03
Yeah, I know the food banks are struggling a bit right now because of just the amount, Uh, that the amount of business, so to speak that they have gotten in the last a month or so has quadrupled in some cases, so they could really use the help there as well.

Larry Campbell:   23:22
Yeah, I agree. You know, I've seen a lot of a lot of the different clients, whatever setting up those programs to help those just like we do normally. Just helping out a little bit more. It's hard, though, right? Cause you is the balance of that and staying away and and social distancing and all. That's right. Um, it makes it even hard to do that. So, um, you know, I feel like everyone's stepping up. I'm pretty optimistic that, you know, hopefully we'll get through this with limited damage to everyone on all facets. Um, you know, obviously we're gonna have, uh there are consequence of this, unfortunately, um, but let's hope, uh, you know, I think we got a strong willed group. At least I know in San Diego. That's the feeling I get is, everyone wants to work together. They want to collaborate when I want to see how they could help each other. And so that's the part that's gonna get us through this.

Chase Peckham:   24:12
Larry, thank you so much for joining us today. Um, that was a lot to go over, uh, and answered a lot of people's questions who? You know you can go online and you can read all kinds of things and not necessarily understand it. Or you could get 15,000 different points of views. So really, thank you so much for simplifying this for us and our listeners. My pleasure. Glad I could help out. And, uh, hopefully people, you know, have a chance to learn from it and obviously share the knowledge that the better off the end of this