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FINANCES FINANCES DURING THE PANDEMIC

MORE STIMULUS CHECKS ARE ON THE WAY!

The IRS just announced that it will send out 50,000 stimulus checks next month. The “catch-up” Economic Impact Payment relates to a mistake the IRS made in processing the original stimulus payments. Here’s what happened.

Stimulus Checks Withheld by Mistake

The IRS will offset tax refunds for various reasons, including certain outstanding debts. For example, the IRS will reduce a taxpayer’s refund if a he or she has outstanding state income tax obligations. In the case of a stimulus check, the CARES Act provided that the IRS would not offset the payment by such obligations, with one notable exception—past due child support.

In the rush to send out stimulus payments, however, the IRS improperly withheld payments from about 50,000 people. For these individuals, the IRS offset their stimulus check for past due child support owed by their spouse. This offset occurred even for those who filed Form 8379 (Injured Spouse Allocation) with their 2019 or 2018 tax returns. This form effectively notifies the IRS not to withhold money from the “injured spouse” just because their husband or wife as an outstanding obligation.

The IRS identified this issue in May. On the Economic Impact Payment Information Center (Question 31), it described the issue as follows:

“The IRS is aware that in some instances a portion of the payment sent to a spouse who filed an injured spouse claim with his or her 2019 tax return (or 2018 tax return if no 2019 tax return has been filed) has been offset by the non-injured spouse’s past-due child support. The IRS is working with the Bureau of Fiscal Service and the U.S. Department of Health and Human Services, Office of Child Support Enforcement, to resolve this issue as quickly as possible.”

At the time, the IRS said it was working to correct the issue, but didn’t provide a timeline for when the payment would go out.

When Do the Catch-Up Stimulus Checks Go Out?

Having now resolved the issue, the IRS states that it will issue the payments in early to mid-September. The payments will be physical checks and will be mailed to those who filed Form 8379 with their 2019 tax returns, or in some cases their 2018 tax returns. Individuals do not need to take any action to receive this payment.

Individuals who didn’t file Form 8379 but had their stimulus check reduced for the same reason will also receive a catch-up stimulus check, but it will take some time. According to the IRS,

“These individuals also do not need to take any action and do not need to submit a Form 8379. The IRS does not yet have a timeframe but will automatically issue the portion of the EIP that was applied to the other spouse’s debt at a later date.”

Taxpayers can use the IRS Get My Payment tool to check on the status of these payments.

Categories
FINANCES FINANCES DURING THE PANDEMIC

ARE YOU CONSIDERING REFINANCING YOUR HOME OR BUYING ONE?

illustration that shows a lot of percentage figures falling around a red house

Mortgage rates have recently hit record lows, and many Americans are jumping at the opportunity to buy new homes as well as refinance. 

According to the Mortgage Banking Association (MBA), mortgage applications have been surging since March 2020 when the Fed slashed interest rates in response to the coronavirus pandemic. By year-end, mortgage applications are expected to double in volume compared to economists’ original 2020 predictions.

Mortgage refinancing applications are also on the rise: Currently, Americans are applying for refinancing loans at a 38% higher rate than they were this time last year.

Refinancing your house means essentially taking out a brand new loan, often for the remainder that you owe on the property (but not always). Depending on how much equity you have in the house (i.e. what you’ve paid on it already) and what your credit score is when applying, refinancing might offer you one or more benefits, including:

  • a lower interest rate (APR)
  • a lower monthly payment
  • a shorter payoff term
  • the ability to cash out your equity for other uses

When you’re faced with economic uncertainty, refinancing your mortgage can help give you some breathing room. But at the same time, if you’re struggling financially, refinancing can be a little more complicated. If you have a bad credit score, you’ll need to take a few steps to ensure you can even qualify. And when you do qualify, you want to make sure your refinanced mortgage is better than your original mortgage, not worse.