How Does the Stimulus Check System Work?

Keren P. —

How Does the Stimulus Check System Work?

History knows a few examples of economic recession affecting several countries, causing unemployment rates to rise and the overall spending to decrease. This has caused a need for the creation of the means to support the economy and help the population to keep the same standard of life. For this reason, the government stimulus check was introduced. This article will define the government stimulus check and shed the light on the way the stimulus check system works.

What is a stimulus check?

In essence, a stimulus check is a payment issued by the government to stimulate the economy and promote spending in times of economic recession. Stimulus checks are intended to provide short-term relief for the taxpayers as they increase the consumption and help the retailers and manufacturers to increase the revenue, therefore. The first stimulus check was introduced after the Great Recession in 2008.

Stimulus check
There are several types of stimulus checks distribution: they are other mailed to the taxpayers or can be issued as an equivalent tax credit. According to the National Bureau of Economic Research (NBER), issuing tax credits does not encourage consumer spending as effectively as the stimulus checks that were mailed to the taxpayers. The number of stimulus checks can vary greatly. The amount of the first stimulus check is determined by the filing status of the taxpayer. According to recent information, joint taxpayers receive twice as much as single taxpayers.

What is a stimulus package?

The stimulus package is the system of certain economic measures, such as stimulus checks, taken by the government to stimulate the downturn in the economy. Many of the Keynesian economics supporters believe that the decision of the government to intervene in times of economic recession can lessen the overall impact of it. Therefore, the introduction of the government stimulus check package will positively affect society. Namely, it will increase spending, lower taxes and interest rates, and, hence, lead the country out of recession.

One of the most recent examples of the government stimulus check package would be the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Issued by the US former President, Donald Trump, in March of 2020, the stimulus checks package totaling $2.2 trillion intended to support small businesses, industries, and private individuals who were affected by the coronavirus pandemic.

stimulus checks

How does the government stimulus check system work?

The government stimulus checks system works according to the following principle. There were three rounds of stimulus checks issued to the taxpayers: the first, second, and third stimulus checks accordingly.

Prerequisites to receive the first stimulus check involve having an income less than $75 000 annual income per single person and less than $150 000 per couple. The very first stimulus check was paid around mid-April to the majority of the taxpayers in the US. Some part of the first stimulus check was distributed through the bank transfer to the individual banks' accounts. Another part of the first stimulus check was transferred to a prepaid debit card at around June-May time.

The second stimulus check was the $900 billion package being a part of the Coronavirus Response and Relief Supplemental Appropriations Act of 2021. The core difference from the first stimulus check is that with the second stimulus check there was a possibility to receive an additional $600 per household for children, as dependents under 16 or younger. The requirements to file for the second stimulus check are exactly the same as for the first stimulus check. However, they offer a possibility to receive government aid for individuals with an income under $87 000.

The third stimulus check was released as fast as a week after the second stimulus check and it was issued under President Biden`s administration. The core purpose of the third stimulus check was to provide financial aid to those, who skipped the first and the second stimulus checks. Prerequisites for the third stimulus check are the same as for the first and the second stimulus checks with the only exception: the dependents' age was not limited.

first stimulus check

Who is eligible to file for stimulus checks?

As a rule, IRS will automatically send the stimulus check to all the individuals, who are eligible for it. However, there is still a possibility to file for the first stimulus check yourself.

Below you can find the criteria of the people eligible for the first, second, and third stimulus check:

-   Single individuals, whose annual income is lower than $75 000

-   Joint individuals, whose annual income is less than $150 000

-  Persons, who don’t have any sources of income

Key takeaways: This article has examined the core concepts of government stimulus checks. If some individuals were not eligible or missed for the first and second stimulus checks, there is still a possibility to file for the third one. According to IRS, the eligibility of the candidate and their dependents will be automatically identified by them. However, some individuals could file for one of the three stimulus checks.


Related Articles in Money