Eligibility for third stimulus check depends on adjusted gross income – Detroit Free Press

The third — and maybe the last — stimulus payments may indeed start showing up soon. But here’s an early warning: If you don’t get a stimulus check this time around, it could be because you’re never going to get one.

Roughly 6.5 million households that received money in the past now won’t be able to bank on receiving either the full $1,400 payment or even a partial payment when it comes to the latest Economic Impact Payments, according to estimates by the nonprofit, non-partisan Tax Foundation.

The rules relating to who qualifies and who doesn’t based on income changed this round.

Singles earning $80,000 or more won’t get a check. Married couples earning $160,000 or more won’t get a check.

But there’s another option: If a single filer made more than $80,000 in 2020 but ends up making less than that in 2021, the taxpayer could claim an Economic Impact Payment based on their 2021 income when they file a tax return during the tax season next year. The same is true for a married couple who did well in 2020 but might make less than $160,000 in 2021.

The Senate approved the $1.9 trillion COVID-19 relief bill Saturday and the House is set to vote Tuesday, paving the way for President Joe Biden to possibly sign the legislation into law this week.

How the IRS calculates the third stimulus

The Internal Revenue Service will use information, including your income, from your 2019 return to calculate the next Economic Impact Payment, if your 2020 tax return isn’t filed and processed by the time the IRS starts issuing the third stimulus payments.

The third stimulus payment is based on such things as whether you’re filing single or married filing a joint return, how many dependents you have, and your adjusted gross income.

The latest goal is to better target the COVID-19 relief cash to households that may need the money the most, including families that have been unable to receive unemployment or other benefits and have experienced a financial hardship during the pandemic.

Under the latest program, additional payments could go to all dependents, not just children 16 and younger. As part of the third stimulus, all dependents — regardless of age — qualify for up to an extra $1,400. As a result, college students age 23 or younger could qualify, or so could elderly parents living with you, according to the measure that passed the Senate on Saturday.

Who is at risk of seeing smaller payouts

The latest program creates a sharp drop-off in the households that will receive payments and in the partial payment amounts, said Garrett Watson, senior policy analyst for the Tax Foundation.

The full $1,400 goes to single people earning up to $75,000. But it phases out quickly after that and is completely phased out for those earning more than $80,000.

A full payment of $2,800 goes to a married couple filing a joint federal income tax return earning up to $150,000. The phaseout begins after that and ends at $160,000.

“This creates an implicit marginal tax at the phaseout range,” Watson said.

Someone might be less willing, for example, to pick up an extra $1,500 or more in income this year if they’re already making $75,000 because they’d lose some decent stimulus cash along the way.

Watson said the latest phaseout range isn’t ideal tax policy.

“It can dissuade people around that income range from earning more income this year when looking ahead to their 2021 tax filing,” Watson said.

What did previous stimulus programs cover?

The first two stimulus programs used a more generous income range.

The past stimulus payments — those for the first and second programs — were gradually reduced for singles with an an adjusted gross income between $75,000 and $100,000 and for married couples who are joint filers with an AGI between $150,000 and $200,000.

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The first stimulus checks — which began rolling out in April 2020 — were up to $1,200 for individuals and up to $2,400 for a married couple. An extra $500 was offered for dependents age 16 and younger.

The second stimulus checks — which began rolling out in January — were up to $600 for individuals and up to $1,200 for a married couple. An extra $600 was offered for dependents age 16 and younger.

The money itself for next round of stimulus payments could roll out in a similar fashion to the last two stimulus payments.

Those who will receive direct deposits will see the money the soonest. Paper checks would take a bit longer.

Watson said filers with direct deposit information could expect the payments within about two weeks of the bill becoming law, similar to the timeline with the direct payments after the second stimulus was signed into law by the president on Dec. 27.

“Paper checks and prepaid debit cards may take longer, through April at least,” he predicted.

“The IRS tends to prioritize those with lower AGIs first when sending out those payments.”

And there is the issue that the Internal Revenue Service is smack in the middle of the tax season. But experts say the IRS has had time to prepare for the next round of checks, so that might not be an issue.

Some households could still experience delays in getting that money.

A group of customers of a variety of tax firms, including Jackson Hewitt, H&R Block and TurboTax, faced issues during the first stimulus rollout and again during the second rollout.

Many of those upset customers had taken out refund advances or agreed to have their tax preparation fees taken out of their tax refunds. Temporary bank accounts were set up by tax preparation firms — and later closed — as part of that process. But stimulus money wasn’t getting to those taxpayers quickly because the IRS initially sent money to those temporary accounts.

Watson said the IRS has been working on this ongoing problem related to tax prep software using temporary accounts to advance taxpayer refunds.

“This will need to be coordinated again during this tax season, too, as many filers will opt for this method and the direct payment could get stuck in the temporary account set up by tax prep software,” he said.

“The IRS is aware of and working on this issue, though.”

ContactSusan Tompor via stompor@freepress.com. Follow her on Twitter@tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.

Source Article from https://www.freep.com/story/money/personal-finance/susan-tompor/2021/03/08/did-senate-pass-stimulus-checks/4626244001/

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Eligibility for third stimulus check depends on adjusted gross income – Detroit Free Press

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