Explainer: Is a Stimulus Check Headed Your Way? If So, What’s the Best Way to Use Your Money?

Economic Impact Payments have already been issued to 2 million New Jerseyans. Here’s a look at how to be smart with that money and how to identify scammers who want to get their hands on it
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Stimulus check funds

Millions of New Jersey residents have begun to receive checks or direct deposits under the massive federal coronavirus-relief package that was approved several weeks ago by the Congress and President Donald Trump, but many more are still waiting for their payments to arrive.

The stimulus money — which has officially been labeled an “Economic Impact Payment” — is designed to help sustain a national economy that has been ravaged by the effects of the COVID-19 pandemic.

But the payments are equally intended to help individuals dealing with significant economic hardships that are being caused or exacerbated by the pandemic. For example, the aid is being issued as claims for unemployment benefits have surged in recent weeks, both in New Jersey — which has seen nearly 1 million new claims filed since mid-March — and across the country.

In all, some $300 billion in federal money  has been budgeted to fund the stimulus payments, which will continue to be distributed over the next several months to all who are qualified to receive them, according to the U.S. Treasury Department.

“We are fully committed to ensuring that you and your family have the support that you need to get through this time,” Trump said in a letter that’s also being mailed to millions of stimulus recipients.

Who’s getting stimulus payments, and how much: The $2 trillion federal-aid bill known as the CARES Act allows for individuals with adjusted gross incomes (AGI) of up to $75,000, as of 2019, or 2018 for those who have yet to submit tax returns for 2019, to receive full payments totaling $1,200. Those payments double in size to $2,400 for married couples who file joint tax returns and have a combined AGI of up to $150,000, again based on 2019 or 2018 tax returns.

In addition, parents are receiving an extra $500 for each dependent child age 16 and under, according to the bill. But children over 16 who are claimed as dependents, including full-time college students up to age 24, are ineligible.

Reduced stimulus aid is being issued to those making over the $75,000 and $150,000 thresholds, with $5 deducted from the total for every $100 in income over the AGI thresholds. Individuals with an AGI over $99,000 and jointly filing couples with an AGI over $198,000 with no children will not receive payments, according to the bill. Also ineligible are immigrants who do not have a valid Social Security number (SSN), as well as their spouses, even if they have a valid SSN and both pay taxes.

The stimulus payments are being distributed automatically to most recipients using the most recent information that the federal Internal Revenue Service has on file for income-tax refunds or Social Security benefits. The IRS reported nearly 90 million payments had been issued as of mid-April, including payments to more than 2 million New Jersey residents. Anyone with a question about the status of their payment can check online directly with the IRS.

The best ways to use the federal money: The stimulus payments are coming with no strings attached, meaning the federal aid can be used for any purpose once the check shows up in the mail or a deposit appears in an individual’s bank account. But the New Jersey Society of Certified Public Accountants has issued a tip sheet for residents trying to figure out the best ways to put their stimulus money to work.

First on the list, according to the accountants’ organization, is paying off essential expenses, such as bills for housing, utilities or car. That’s especially true for those who have suffered a job loss. Next up is using the stimulus aid to ensure personal emergency funds are fully stocked to cover at least three to six months of expenses in case a job loss occurs. Paying down high-interest debt or loans, such as money owed to credit-card companies, is also a top priority, as is making contributions to retirement-savings accounts like 401(k)s, and health-savings accounts, which are commonly referred to as HSAs.

The accountants group also suggests those who have enough money to cover their bills and have adequate funds set aside for a personal emergency should consider making a charitable contribution, such as a donation to food banks, which are seeing a huge increase in demand in New Jersey during the pandemic.

Watch out for scams: Unfortunately, the initial distribution of federal-stimulus aid has already prompted concerns about scammers who have come up with creative ways to trick people who are receiving their payments. The IRS is warning that seniors and retirees are especially at risk.

The IRS has recommended a number of ways for stimulus recipients to identify a scam, whether they are attempted via mail, email, social media, text, over the telephone or in-person. They include keeping an eye out for anyone who identifies the federal aid as a stimulus “check” instead of the official label of “Economic Impact Payment.” Anyone who asks for personal information like bank-account numbers or offers to help speed up the receipt of a stimulus payment may also be trying to conduct a scam, according to the IRS.

Personal information should only be provided directly to the IRS using its website for the stimulus payments and never via call, text or email.

“The IRS isn’t going to call you asking to verify or provide your financial information so you can get an economic impact payment or your refund faster,” said IRS Commissioner Chuck Rettig. “That also applies to surprise emails that appear to be coming from the IRS. Remember, don’t open them or click on attachments or links.

The IRS is encouraging taxpayers to report suspected scams online. Stimulus scams can also be reported to the Federal Trade Commission.