Second Stimulus Check: why is January 15 important for IRS payment?

The tortuous process of Congress passing a second coronavirus economic relief package finally came to a conclusion a week ago when lawmakers passed a $900 billion bill to provide much-needed funds in areas including extended unemployment benefits, financial aid for small businesses suffering the knock-on effects of the global economic downturn caused by the covid-19 crisis, funding for schools, eviction moratoriums, wider testing and tracing capacities and $29 billion for the purchase and distribution of vaccines in the US. As has been the case throughout negotiations for a second package, which has arrived nine months after the CARES Act was signed into law, the sticking point remains another round of stimulus check payments to US citizens. 

Trump puts pen to paper on fresh stimulus package

The $900 billion package passed by Congress on 21 December includes further payments of $600 per person for adults who earn up to $75,000 per annum and children. However, Donald Trump complained about the “measly” amount provided in the package, officially titled the Coronavirus Response and Relief Supplemental Appropriations Act, with the current president stalling on signing the bill while he held out for payments of $2,000 to be approved. Under significant pressure from both sides of the political divide Trump eventually put pen to paper.

The question now is: when will the second round of stimulus payments be sent out?

After the bill was passed, Treasury secretary Steven Mnuchin told CNBC that he expects the first tranche of direct payments to be sent out before the end of the year, with a slight delay for those receiving a check in the mail in the form of a paper check or a prepaid debit card. In that case, recipients can expect to receive payment sometime during the first three weeks of January 2021. 

January 15, 2021: IRS cut-off date 

January 15 is the cut-off date in the $900 billion stimulus bill by which time the IRS and US Treasury must stop sending checks as part of this round of delivery. If you don't receive your full second stimulus check money by January 15, you will need to claim all or part of the missing amount when you file your federal tax returns in 2021 through the Recovery Rebate Credit. 

Claimants will also be able to claim any money the IRS still owes you from the first round of payments sent out earlier in 2020. 

"Most of these will be direct deposits. We call them 'checks in the mail,' but most will be direct deposits," Treasury secretary Mnuchin said on December 21. "It will be within three weeks. We are determined to get money in people's pockets immediately. So that will be within three weeks." 

As of last summer, 75% of the first round of stimulus payments were sent straight to people's bank accounts using direct deposit, which brings hope for the majority of people to receive their second payment before January 15. 

People who receive their stimulus payment through direct deposit are unlikely to be affected, however, there is potentially a distinct disadvantage for people who don't already have direct deposit set up with the IRS. 

Adding the delivery of the second stimulus check to the 2020 tax return will more than likely delay payments for many people, considering a wide variance in circumstances will cause people to file taxes in January and others in April, or even later if they need to request an extension. It remains unclear as to how quickly the IRS will process the payments.