Over the last few weeks, the Dept. of the Treasury has been mailing out the second round of stimulus checks officially called the “Economic Impact Payment” (EIP)to qualified tax payers. Due to the way the second stimulus bill was written, the Treasury Dept. has until Friday, January 15th to send out all stimulus checks. So, if you qualify, you should be receiving your payment soon if you haven’t already. Since the second stimulus bill was passed so late last year, there was very little time to digest the bill let alone find out if we even qualify to receive a check. To help you make sense out of all of this, I have outlined 10 key things you should be aware of regarding the second round of stimulus checks.
1. What are you entitled to?
Every qualified household will receive a check equal to the total amount of people in the family. The calculation is based on $600 per qualified family member.
Here is what that can look like depending on your household:
Single parent with 2 dependent children
Married couple with no dependents
Married couple with 4 kids but only 2 are dependents
1 x $600 = $600
3 x $600 = $1,800
2 x $600 = $1,200
4 x $600 = $2,400
If your Adjusted Gross Income is at or below the IRS threshold you will receive this full EIP Amount.
2. Who qualifies as your dependent?
Per the IRS rules, a person is considered your dependent if they meet the following rules:
- Relationship to the individual who is eligible for the Payment: The child is your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, grandchild, niece, or nephew).
- Child's age: Your child was under age 17 at the end of the taxable year.
- Child's citizenship: Your child is a U.S. citizen, U.S. national, or U.S. resident alien.
- Child's Residency: Your Child must have lived with you for more than half the tax year.
- Support for Child: Your Child must not provide over half of own support for the tax year.
- Child's taxpayer identification number: Your child has a valid work eligible Social Security number or an Adoption Taxpayer Identification Number (ATIN) that was issued before July 15, 2020.
- Children born in 2020: Your child will be eligible to receive the original $500 rebate and the additional $600 rebate.
3. What is the Adjusted Gross Income Threshold?
The Treasury Dept. limited the people that will receive the EIP checks to those that meet the following Adjusted Gross Income (AGI) thresholds:
Head of Household
Married Filing Jointly
Adjusted Gross Income (AGI) Limit
While the EIP is a 2020 tax year payment, The Treasury Dept. will initially use your 2019 AGI to determine your initial eligibility and will reconcile the payment with your 2020 AGI.
4. What happens if your AGI is above the Threshold?
If your AGI is above the IRS's threshold, your base EIP amount will be reduced by $5 for each $100 your AGI exceeds the threshold until it is eventually phased out.
For example, if you are a single parent with 2 dependent children with a 2019 AGI of $80,000 your EPI calculation is:
Single AGI Limit
Amount Above AGI Limit
Actual EIP Received
3 x $600 = $1,800
$5,000 x 5% = $250
$1,800 - $250 = $1,550
If you are Married with 4 dependent children and your 2019 AGI is $200,000 your EPI calculation is:
MFJ AGI Limit
Amount Above AGI Limit
Actual EIP Received
6 x $600 = $3,600
$50,000 x 5% = $2,500
$3,600 - $2,500 = $1,100
You can use these examples to calculate your personal situation. As you can see, even if your AGI is above the established AGI limits, you can still receive an EIP payment. Keep in mind that once the EIP Reduction is equal to your base EIP, you will not receive a payment. You can also look at it this way:
- An individual without children will not receive any rebate if their AGI exceeds $87,000.
- A couple without children will not receive any rebate if their AGI exceeds $174,000.
- A family of four will not receive any rebate if their AGI exceeds $198,000.
5. What happens if your 2020 AGI is different from your 2019 AGI?
As I said earlier, while the stimulus checks are a 2020 payment, the method to determine eligibility is based on your 2019 income. This chart below shows what to do if your 2019 and 2020 AGI differ:
2020 AGI Lower than Threshold
2020 AGI higher than Threshold
2019 AGI Lower than Threshold
2019 AGI higher than Threshold
6. What do you do if you are eligible to receive the EIP but did not file a tax return in 2019?
If you did not file a tax return because your income was below the filing requirement threshold, you can receive payment by filing your 2020 tax return and applying for the Recovery Rebate Credit.
7. What if the tax filer died in 2020?
If the tax filer passed away in 2020 and they qualified for the EIP check, an EIP payment will be sent to them. If a check is not received, their heirs can apply for Recovery Rebate Credit.
8. How do you find the amounts of your Economic Impact Payments?
IRS letters: If eligible, you should have received IRS Notice 1444 for the first Economic Impact Payment and Notice 1444-B for the second Economic Impact Payment.
On-line: You can also find out the status of your stimulus check by going to the IRS website at: https://www.irs.gov/coronavirus/economic-impact-payments
9. How will you receive your Economic Impact Payment?
If the IRS has your banking information already on-file, they will send payment via a direct deposit to your bank. If they do not have your banking information on file, they will send you a check or debit card.
10. What is the Recovery Rebate Credit?
If you are entitled to receive a check and you received the full amounts of both Economic Impact Payments you do not need to complete any information about the Recovery Rebate Credit on your 2020 tax return. You have already received the full amount of the Recovery Rebate Credit as Economic Impact Payments. If you are entitled to payments, you received the full amounts of both Economic Impact Payments if:
• Your first Economic Impact Payment was $1,200 ($2,400 if married filing jointly for 2020) plus $500 for each qualifying child you had in 2020; and.
• Your second Economic Impact Payment was $600 ($1,200 if married filing jointly for 2020) plus $600 for each qualifying child you had in 2020.
If you did not receive the full amounts of both Economic Impact Payments, you may claim the Recovery Rebate Credit on your 2020 Form 1040 or 1040-SR. Again, the Treasury Dept. might have missed sending you payment. Or, you might not have qualified initially because your 2019 AGI was too high but now you qualify in 2020 because your AGI is lower than the required threshold.
The IRS seems to never make things easy for us. Hopefully after reading all of this, you have a better understanding of how you qualify for the stimulus check, how you will receive it, and what to do if you did not receive a check.
This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. The opinions expressed and material provided are for general information only.