Third Stimulus is On The Way for 2021

On Thursday, March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law. Below, we will discuss some of the tax-related provisions. First, we’ll review the much anticipated third round of stimulus payments, which have already started rolling out as an advanced payment of a 2021 tax credit. Less spoken about is a new change to unemployment compensation which applies to the 2020 tax year. Additionally, there are changes to the child tax credit and dependent care credit, which will only apply to the 2021 tax year, so we will address those in a follow-up blog.

Third round of stimulus checks: The most talked-about aspect of this new law is the latest round of stimulus payments. Below is a Q&A to help you understand your eligibility.

How much?

$1,400 per person, including dependents, regardless of their age.

Who is eligible?

Single taxpayers with income below $75,000, head of household $112,500, married filing joint $150,000 are eligible for the full stimulus payment. Above those amounts, the stimulus amount begins to phase out and is completely phased out when income reaches $80,000 for single, $120,000 head of household, $160,000 married filing joint

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How is eligibility determined?

Eligibility for the advanced payment is based on 2020 tax returns if already processed by the IRS. Otherwise, the payment will be determined based on 2019.

What if the IRS has not yet processed my 2020 return, and I am not eligible based on 2019? Am I stuck waiting until I file my 2021 tax return to claim this credit?

For this third stimulus, the bill specifically states that within 90 days after the tax return deadline or September 1, 2021, whichever is earlier, the IRS will make an additional determination of your eligibility for the stimulus payment. Therefore, if you are eligible based on 2020, but your 2020 return has not yet been processed, you will still get the payment before filing 2021 taxes.

What if my spouse has an ITIN?

Just like for the second stimulus, filing jointly with a spouse who has an ITIN (individual taxpayer identification number) as opposed to an SSN (social security number) will not disqualify those on the tax return with valid SSNs from receiving the stimulus. However, the taxpayer with the ITIN will not be eligible.

Forget about the third stimulus—I still have not received the first two stimulus payments! What should I do?

You can no longer check the status of the first two stimulus payments on the IRS’ Get My Payment online tool. However, you can create an online account with the IRS to check the status. If it says that payment was issued, but you have not received it, you will need to file Form 3911 to trace the payment and file a 2020 tax return showing that no payment was received.  The payment will be calculated as the Recovery Rebate Credit on your tax return.

How do I check the status of the third stimulus payment?

The IRS’ Get my Payment online tool is now up and running to give you the status of the third stimulus payment

As mentioned earlier, we will address the child tax credit and unemployment compensation exclusion in a separate blog. Stay tuned!