President Biden signed the $1.9 trillion COVID-19 relief package called the American Rescue Plan Act (The Act hereafter) of 2021 Thursday afternoon. This will send direct Economic Impact Payments of up to $1,400 to qualifying Americans. The bill includes several tax breaks for stimulating the economy.
The Act offers the full $1,400 to those with adjusted gross income (AGI) of up to $75,000 for individuals, $112,500 for heads of household and $150,000 for married couples who file a joint tax return. For single taxpayers, the credit and corresponding payment will begin to phase out at an adjusted gross income (AGI) of $75,000, and the credit will be completely phased out for single taxpayers with an AGI over $80,000. For married taxpayers who file jointly, the phase out will begin at an AGI of $150,000 and end at AGI of $160,000. And for heads of household, the phase out will begin at an AGI of $112,500 and be complete at AGI of $120,000. The act uses 2019 AGI to determine eligibility, unless the taxpayer has already filed a 2020 return. Adult dependents such as college students and qualifying relatives who are claimed as dependents are eligible for this round of stimulus payments. The White House press secretary, Jen Psaki, said that direct deposits will start hitting many bank accounts as soon as this weekend.
An Update on Stimulus Payments and Your Tax Return (3-15-21)
It the taxpayer’s 2020 tax return is not completed, the IRS will look back at the taxpayer’s 2019 income tax return and send a check based off of that.
If the taxpayer’s income was too high in 2019, but would qualify based on their 2020 income, you have until July 15th to get your 2020 tax return submitted to get the third round of stimulus. If the return isn’t done by then, the IRS will determine the stimulus as a credit on the taxpayer’s 2021 tax return.
Questions or want to discuss how this bill affects your individual situation? Contact one of our tax and business consulting experts at (888) 388-1040.
Source: Journal of Accountancy