Each year I help over 500 clients file their Canadian and US tax returns as well as plan for both their Canadian and US investment accounts. I also regularly help new US clients plan for their move to Canada.
How quickly things can change in Washington. Just weeks after a months-long stalemate was broken with the approval of a $900 per individual second stimulus payment, incoming-President Biden has unveiled a $1.9 trillion COVID relief proposal that will provide direct payments of $1,400 per person and expand both the earned income and child tax credits. Although specifics are still forthcoming, the belief is that the plan also opens up eligibility to both child and adult dependents along with mixed-status households, not only those households in which one spouse is a U.S. citizen.
In what might be the most dramatic swing in this ongoing saga is Biden’s indication that he is willing to increase the deficit substantially to ensure that Americans at financial risk due to the coronavirus pandemic get the support they need. “It’s not just that smart fiscal investments, including deficit spending, are more urgent than ever,” Biden said Thursday, January 14. “It’s that the return on these investments — in jobs, in racial equity — will prevent long-term economic damage and the benefits will far surpass the costs” (The Hill).
Although the Democrats control both the House and Senate thanks to the recent Georgia runoff results, passing Biden’s proposal is far from a sure thing. Essentially, every Democratic Senator, including moderates and progressives, would have to support a proposal unless Biden can swing a few Republicans in line with his vote.
Other critical pieces of the proposal:
- $400 in weekly federal unemployment through September, including for the self-employed, independent contractors, and gig workers.
- A push to increase the minimum wage to $15 per hour.
- $350 billion in aid to state and local governments.
- $170 billion in aid to K-12 schools and universities.
- An additional $25 billion in rental assistance.
- $20 billion for a national vaccination program.
- $50 billion for diagnostic COVID testing.
Second Stimulus Checks
As the country waits on this debate, Friday, January 15, was the last day the IRS automatically sent second stimulus checks to qualified individuals in one of three forms: direct deposit to bank accounts, physical checks, and Electronic Impact Payment (EIP) cards. For those individuals who do not receive a second payment, the money will have to be claimed when filing personal incoming taxes for 2020.
It is important to note that the income limits for the second stimulus payment are lower than for the first. The limit for single tax filers dropped to $87,000 from $99,000. The head of household limit dropped to $124,500 from $146,00, and the limit for married couples who file jointly went from $198,000 to $174,000.
Some other changes (and non-changes) between the first and second stimulus checks:
- Individuals who owe child support will not have their second payments garnished to cover payments in arrears.
- Incarcerated individuals are still eligible to receive second checks under the guidelines established in the first stimulus package.
- There are reports that almost 13 million Americans who filed their taxes through such companies as Turbo Tax and HR Block might have had second stimulus checks deposited to the wrong bank accounts. If you are worried this happen, the first step is to check the IRS website’s “Get My Payment” portal for updated information and to ensure that your address and bank account information is up to date and accurate.
Watch this blog for news on this and other financial issues throughout Inauguration Week.