Plan Ahead for Your Coronavirus Tax Relief and Stimulus Money
Some people have started receiving money direct-deposited from the stimulus plan– the IRS has details about the program here. Congress earmarked these funds in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed by Congress several weeks ago.
How much are people getting? It is $1,200 for individual tax filers, and $2,400 for joint tax filers, with $500 for each child. That amount begins to phase out for those with income above $75,000. Individual filers with an adjusted gross income (AGI) of $99,000, and joint filers above $198,000, do not receive any stimulus money.
If you expect some money, try this link at the IRS to check the status of your payment.
How are you going to use the money? Here are some thoughts:
- Make a Plan
- Two: Avoid Scams
- Support Local Businesses
- Consider Charitable Giving
1. Make a Plan
- if you do not have a robust emergency fund, consider adding to it. There is no rule of thumb for “how much” you should have. At a bare minimum, having $1,000 set aside is a first step. I recommend clients add to this account $100 a month to this, ideally set up in an account that is easy to contribute to, but not easy to access. Here is a post on emergency funds: An Emergency Fund = Priceless.
- For another, and humorous take on how to handle your stimulus money–the husband/wife team at Wallet Win have a super cute video called “Budget Your Covid Dough.” It’s a parody video song of “The Greatest Show” theme. I loved this line from it: “Include a few things you want, and everything that you need.” Nice!
Two: Avoid Scams
There are innumerable scammers out there trying to get their hands on this stimulus money, so it (literally) pays to be alert especially at this time.
Fortunately, there are quite a few resources from government sources to help avoid criminals:
- “Coronavirus checks: flattening the scam curve” from the Federal Trade Commission (FTC)
- “Coronavirus Scams” (also from the FTC)
- The IRS, which is administering the relief money, points out IRS information about what to look out for when it comes to coronavirus scams.
- Here is a more general IRS list of common scams and how to avoid them.
- Looking for a book to help you understand how fraudsters try to scam people out of money? Try Scam Me If You Can: Simple Strategies to Outsmart Today’s Rip-Off Artists by Frank W. Abagnale. This book, by the scammer turned FBI agent who wrote the autobiographical Catch Me If You Can, not only covers the seemingly endless variation of ways that fraudsters try to cheat money out of people. It also covers the psychological tricks that criminals use to get people to trust them, or feel a sense of urgency.
I first read this book early in 2020, before all the pandemic news, but one quote I wrote down from is especially helpful during this time:
“I believe we have to get back to forming strong communities where people know and look out for one another. A lot of fraud happens in isolation and online. If we look up from our electronic devices and limit our online time to specific tasks and goals, we will vie less prone to scammers online. We’ll also feel happier and less isolated.”
–Frank W. Abangale
This is even more true during this pandemic time—we can all continue to form communities, reach out to people in real life (even if, for right now, that is through phone calls, FaceTime, Skype, or Zoom).
Three: Support Local Businesses
There are so many ways to support local businesses during this time of shelter-in-place. Just a few:
- *order takeout or delivery. A friend posted that her family is only getting take-out once a week during the coronavirus crisis for her family of eight, which means she is making the remaining 160 meals (!). First of all, kudos to her family for only getting takeout once a week. But what a cool idea, to add up the number of meals (total) your family eats in a week. Just the sheer number (it’s 105 for us, not including snacks) may have you consider this good way to support local businesses. [Over the weekend we got this “family feast” from Panera Bread. It was delicious, and we had leftovers.]
- *buy online from local businesses. Ordering online from businesses, even if it is a little more complicated than clicking “buy now” on Amazon, will go a long way towards supporting the local economy.
- *be friendly when you do go out. Wearing a mask out in public has made it a little more challenging to show friendliness (such as with a smile) during this time. But we can still greet people and be kind, especially to those working in stores. Being kind is free, friendly, and will make you feel a bit better.
Four: Consider Charitable Giving
Charities of all kinds are hurting in these days. If you are in a position to give more now because your job is stable–and you have a decent emergency fund–consider upping the amount going to your local church or charity.
- *if you attend church, really consider giving more these days. Since church services are cancelled or online-only, churches are missing the typical way people give–through the passing of the basket. If you have not yet set up online giving, take some of the time we are stuck at home to set that up–and make it a recurring contribution. I write about ways to start that here in this post about online giving, and here about the benefits of a donor-advised fund.
- Take advantage of one small feature of the CARES Act that promotes more charitable giving. This is for the majority of people who take the standard deduction instead of itemizing their charitable deductions. For those people, the CARES Act allows an additional $300 charitable deduction for individuals, $600 for joint filers. (I am frankly surprised this number isn’t higher). This is a great incentive to give a little extra this year, and have it cost you less than the amount you donate.
- For example: if you are a married couple with an AGI of $60,000, a $600 charitable deduction will reduce your taxes by $132. This means that the gift is still worth $600 to the charity, but only costs you $468.
Do you have plans for the stimulus money? Any other tips for readers?
