Another round of direct payments was among the central components of the relief legislation signed into law on December 27, 2020. In contrast to the first round of stimulus payments, however, these “Economic Impact Payments” are smaller ($600 per taxpayer and $1,200 per joint filers) and have different eligibility requirements. As second wave payments start to hit bank accounts, let’s take a look at some frequently asked questions about the stimulus checks and who will receive one.
Q: Will I get a second stimulus payment?
This batch of payments uses the same adjusted gross income (AGI) thresholds as the original round from the CARES Act – $75,000 for single taxpayers, $112,500 for head of household filers and $150,000 for married couples. The payments begin to phase out by $5 per every $100 of income above these thresholds, meaning that single taxpayers earning over $87,000, head of household filers earning more than $124,500 and married couples earning more than $174,000 will not qualify. Taxpayers exceeding these AGI thresholds with dependents will see the upper AGI threshold increase by $12,000 for each qualifying child.
The IRS will use filed tax returns for 2019 to determine stimulus payment eligibility and amount.
Q: Will my dependent child also receive a payment?
Yes, children under the age of 17 as of December 31, 2019 will receive the same $600 payment as eligible adults, which is higher than the $500 distributed in the first found.
Another major difference from the first round is the exclusion of child dependents aged 17 or older, based on the tax code’s definition of “qualifying children” as those who have not yet turned 17. No adult dependents, such as college students, seniors or individuals with disabilities, will receive payments.
Q: If I do qualify, when can I expect my payment?
Many eligible Americans have already received their stimulus payments via direct deposit to their bank accounts. This wave of direct deposit started in late December. The IRS started mailing paper checks on December 30, which means recipients could find them in their mailboxes in early to mid-January after the New Year holiday and other deliver timing disparities.
The IRS relaunched its Get My Payment portal for taxpayers to track their stimulus funds. The relief legislation specifically requires distribution of the second round of payments by January 15. Americans who do not receive full payment by that date will be able to claim the missing amount on their federal tax return in 2021 through the IRS Recovery Rebate Credit.
Q: In what format will I receive my payment?
Americans who do not receive a direct deposit payment in the first week of January, based on their tax information on file or submitted through the IRS Get My Payment portal in 2020, will likely receive a paper check or debit card. The IRS states that debit cards may be used to supplement and expedite paper check distribution. Recipients of a hard copy payment (check or debit card) will see a white envelope with the U.S. Treasury seal prominently displayed and labeled as an “Economic Impact Payment.” Get more details on the debit cards.
Q: What if my bank account information is outdated?
The IRS will use the data currently in its systems to issue the second round payments.
If the payment is sent to an inactive or closed account, the bank must return the money to the IRS. In these circumstances, the IRS advises taxpayers to claim the Economic Impact Payment on their 2020 return.
Q: What if I moved during 2020?
If the IRS has direct deposit information on file, taxpayers will receive an electronic payment. If taxpayers notified the IRS of address change (via Form 8822), they should receive a paper check to their new address. Those who did not file Form 8822 will not receive a paper check at their new address. In these circumstances, the IRS advises taxpayers to claim the Economic Impact Payment on their 2020 return.
RKL’s individual tax experts continue to monitor new guidance from the U.S. Treasury and the IRS related to the second round of stimulus payments. Contact your RKL advisor or use the form below to submit questions, and stay tuned to our Insights Center for more guidance and information.