Paying down debt, starting or supplementing an emergency fund and using a little for fun are great ways to manage the government stimulus check.
Use this opportunity to start 2025 with smart financial moves for a more secure year ahead.
Key Takeaways
- The IRS will distribute stimulus payments to people who should have received them during the COVID-19 pandemic.
- Qualified taxpayers could receive up to $1,400 without completing additional paperwork.
- In the future, be sure to complete your tax forms correctly, so you don’t miss out on a valuable credit.
If you thought the days of COVID-19-era stimulus payments were long over, you may be in for a pleasant financial surprise. In December 2024, the IRS announced that the agency would be distributing approximately $2.4 billion in funds to taxpayers who should have received stimulus checks a couple of years ago.
The amount of the new round of stimulus checks vary but can be as much as $1,400. If you’re among the taxpayers who will be getting a sudden influx of cash, plan your next steps now. Although you can do anything you want with the money, your best bet is to manage it in a way that benefits your present and future.
Why You Didn’t Get the COVID-19 Stimulus Money the First Time
You will receive a stimulus check this year if you qualified for an economic impact payment but didn’t claim the recovery rebate credit on your 2021 tax return.
According to the IRS, approximately 1 million taxpayers who were due stimulus money either left the recovery rebate credit area blank or entered “$0” on their tax forms. Now the IRS has corrected the error and is paying taxpayers who are owed.
When the Government Stimulus Money Will Arrive
If you’re in line for a surprise check from the IRS, there’s more good news. You don’t have to amend your 2021 tax forms, complete an application or make a phone call to the agency. Just wait for the money you’re owed to land in your bank account as an electronic payment or to arrive in the mail as a paper check.
The only people who have to take action with the IRS are those who didn’t file their 2021 tax returns. In that case, you’ll have to file forms for that year by April 15, 2025, to see if you can claim the recovery rebate credit.
The IRS reports that the majority of the back stimulus funds will be disbursed by the end of January, and taxpayers receiving payments will get a separate letter in the mail to notify them.
What to Do With the Stimulus Windfall
You can probably find plenty of uses for free money – from splurging on NFL tickets to buying a luxury handbag – but remember the initial intention of the stimulus checks.
In 2021, the U.S. government designated economic impact payments as a way to provide financial relief to Americans during the economic downturn set off by the COVID-19 pandemic. Taxpayers who received the money could spend it, thus helping businesses stay open, as well as support family members and manage debt.
Today is no different, says Chad Olivier, certified financial planner and CEO of The Olivier Group in Baton Rouge, Louisiana.
“If you’re wondering how to make the most of a surprise stimulus check, a great place to start is paying down high-interest debt, like credit cards, especially if holiday spending added up more than expected,” he says.
Making an extra credit card or loan payment to drive expensive balances down may not be exciting, but it will help you pay less in interest over time.
“Another smart move is putting some money toward your emergency fund, which ideally covers three to six months of expenses,” Olivier says. While the stimulus check can’t build an entire emergency fund, it can give you a healthy head start.
Whether you apply the money to debt or savings, this is an opportunity to start 2025 with the type of smart financial moves that can set you up for a more secure year ahead.
That said, feel free to take a little out for fun, too.
“You have to enjoy life, that’s what money is for,” Olivier says. Reserving $50 or so for a special meal out or attending a comedy show can not only give you an emotional boost, it pays it forward to a local business as well.
In the Future, Prepare Your Taxes Like or With a Pro
Although getting money you didn’t expect is a thrill, your best course of action is to pay the right amount of taxes and claim all the credits you deserve when you file.
Remember, too, that you generally have three years to file an amended tax return if you’ve missed or skipped something the first time around.
If you need assistance to ensure you’re filling out your tax forms correctly, you can hire a qualified tax preparer. Free tax help may also be available.
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