On March 11, 2020, the World Health Organization (WHO) officially declared COVID-19 as a global pandemic. Today, we are just past the one year mark of the pandemic and individuals across the globe are experiencing emotional, physical and economical implications. In an effort to ease the pandemic’s detrimental effects, the federal government has recently passed a third stimulus package called the American Rescue Plan Act.
Under this new legislation, eligible individuals and families will receive stimulus checks up to $1,400 per person. As a reminder, below is everything you need to know about your third stimulus check.
The Rundown on Stimulus Checks: Your Questions Answered
Like previous stimulus checks, taxpayers who are eligible for the payment will receive a direct deposit of up to $1,400, and couples will receive $2,800. Also, families with children under the age of 17 will receive an additional $1,400 per child. However, the payment will begin to phase out for individuals with a 2019 or 2020 adjusted gross income of $75,000, couples with a $150,000 income and head of households with a $112,500 income.1
It is important to note that the initial amount paid will be based on either a taxpayer’s 2019 or 2020 income tax return (whichever is the latest return that the IRS has on file), but it will ultimately be ‘trued up’ if a taxpayer is owed money based on their actual 2020 income. In other words, taxpayers will be given an estimated amount based on the last income the government has on file, however if an individuals 2020 tax return shows they made less money than the previous year they could end up getting even more money later.
How Does the Phase-Out Work?
The American Rescue Plan states that individuals who make under $75,000 and couples who make under $150,000 are eligible for the full stimulus check payment.
However, the amount of the stimulus check becomes reduced for taxpayers with higher incomes. For instance, individual filers earning between $75,000 and $80,000, or couples earning between $150,000 and $160,000 stimulus check payments will be reduced. This means that individuals with an income higher than $80,000 are not eligible to receive a stimulus check and neither are joint filers with an income over $160,000.1
For head of household filers, those earning between $112,500 and $120,000 will also receive a reduced payment. While those earning $120,000 will not be eligible to receive a stimulus check.1
Are Noncitizens Eligible?
The CARES Act did not allow families of mixed-status to receive a stimulus check. This refers to households in which a U.S. citizen is married to a noncitizen. However, in the new American Rescue Plan Act that was passed by the federal government on March 11, 2021, it states that both the U.S. citizen and their noncitizen spouse are eligible to receive a stimulus check.2
How Will I Receive My Payment?
The IRS will use information from 2019 or 2020 tax returns to calculate your payment amount and will send the payment to the bank account listed on the return.2
What if the IRS Does Not Have My Direct Deposit Information?
Individuals can track the status of their stimulus check and learn what information may still be needed by the government in order to issue the stimulus check, by visiting the IRS online portal called Get My Payment. The portal is easy to use and in order to track your stimulus check you will need to fill out your info on the Get My Payment site, including Social Security Number, Date of Birth, address, and zip code. According to the IRS, this portal will provide important information such as your payment status, payment type and whether additional information (including bank account information) is required.
If I Usually Do Not File a Tax Return, How Can I Receive a Check?
For individuals who typically do not file a tax return, including low-income taxpayers, senior citizens and Social Security recipients, you will be required to file a simple tax return (but still will not owe tax) in order to receive their check. The IRS has created a special page dedicated to the Coronavirus and will be updating it with next steps on how to do this soon.
What Is the Difference Between a Stimulus Check and a Tax Credit?
The stimulus check is the same as a tax credit, and it is specifically an advanced refundable tax credit, meaning it is a refund distributed to you and is also sent in advance of the 2020 tax return.3 However, there is a difference between a refundable tax credit and nonrefundable tax credit. A nonrefundable credit in not available as a refund and it only applies to the amount of taxes you owe. 3
Is the Stimulus Check Taxable?
No, the stimulus check is not taxable and you do not have to pay income tax on them. The IRS has said that the stimulus checks are not income, instead they are considered a tax credit.
For the most part the requirements for eligibility remain the same from previous stimulus checks so if you received a previous stimulus check, it is likely you can expect to receive another one in the coming weeks. As with anything related to the current pandemic, feel free to reach out to a financial advisor if you have any questions regarding your stimulus check or what to do with it.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.