With President Trump’s signature now on the Consolidated Appropriations Act for 2021, many households are looking forward to receiving a second round of economic stimulus checks. But how will the U.S. government determine the amount of coronavirus relief payments going to recipients?
THE QUESTION
Will the government base the second round of stimulus payments on income tax filings again, even if we haven’t filed returns yet for 2020?
THE ANSWER
Yes, the payments will use 2019 income tax returns to determine the amount of each check in advanced payments. Ultimately, your 2020 tax filings are what matter and the amount you receive may be adjusted based on that.
WHAT WE FOUND
Technically, the payments will be a credit against your 2020 taxes, although the government will use your 2019 filing to decide how much you get in advance.
In a summary posted by the National Conference of State Legislatures, the credit is $600 per taxpayer ($1,200 for married couples filing jointly) plus $600 per child. The credit begins phasing out at $75,000 of adjusted gross income ($150,000 for married couples filing jointly) “at a rate of $5 per $100 of additional income.”
The summary adds: “Taxpayers receiving an advance payment that exceeds the amount of their eligible credit will not be required to repay any amount of the payment. If the amount of the credit determined on the taxpayer’s 2020 tax return exceeds the amount of the advance payment, taxpayers will receive the difference as a refundable tax credit.”
This means that if someone was ineligible to receive the stimulus check based on their 2019 taxes, they will still receive the credit when they file their taxes in 2020.
For an example let's imagine a college student who was listed as a “dependant” on 2019 tax filings but became employed in 2020. If they earned less than $75,000 in 2020, they will have qualified for both stimulus credits, but will not receive them until their 2020 taxes are filed.
Similarly, someone who made too much money in 2019 to receive a credit but made less in 2020 or lost their job will also receive the appropriate credits in their 2020 tax return.
The law, approved during the holidays, is so new that the IRS hasn’t yet updated its page on frequently asked questions about the stimulus checks.
Although, the details aren’t final. An amendment to make the stimulus checks $2,000 has passed the House. And while Senate Majority Leader Mitch McConnell has blocked Senate Democrats’ push to vote on the bill, he did say the Senate would “begin a process” to address the issue.
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