Jo Willetts, EA
Director, Tax Resources
Published on: March 12, 2021
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A new COVID-19 economic relief package, named the American Rescue Plan Act of 2021 (ARPA) includes a third round of Economic Impact Payments (EIP), or stimulus, as well as changes to unemployment insurance and more. Below is what taxpayers need to know.
The payment amounts for the third round of stimulus are as follows:
This newest round of stimulus payments (EIP3) will be reconciled on the 2021 tax return. However, the payment will be based on the taxpayer's most recent processed tax return, 2020 or 2019. This includes anyone who successfully registered online at IRS.gov using the agency's Non-Filers tool last year, or alternatively, submitted a special simplified tax return to the IRS. If the IRS has received and processed a taxpayer's 2020 return, the agency will make the calculation based on that return.
Eligible individuals filing as single or married filing separately must not exceed $75,000 for the full amount. Others filing as head of household must not exceed $112,500, and those filing jointly must not exceed $150,000 for the full amount.
The maximum income for the full credit is:
The credit phases out between:
A couple filing Married Filing Jointly is not eligible for a stimulus payment if their income is $160,000 or greater. A Single taxpayer would no longer be eligible if their income is $80,000 or greater. A Head of Household taxpayer would no longer be eligible if their income is $120,000 or greater. The number of dependents has no bearing on the phase-out for this round three of stimulus.
Those who died before January 1, 2021, are not eligible for this third round of stimulus.
As was the case under the first round of stimulus payments, taxpayers without an SSN are not eligible for the stimulus payment.
Individuals with an ITIN do not qualify for the stimulus payment. However, if the individual is married to a taxpayer with an SSN, the spouse and any qualifying children with an SSN, are eligible for the stimulus payment.
If either spouse is an active member of the U.S. Armed Forces at any time during the taxable year, only one spouse needs to have a valid SSN for the couple to receive up to $2,800 for themselves in the third stimulus payment.
The IRS began issuing the third stimulus payments on March 12, 2021.
If the IRS has processed your tax year 2020 return by the time your stimulus funds are disbursed, then you will receive stimulus funds through the same method used for your tax year 2020 return. If the IRS has not processed your tax year 2020 return by the time your stimulus funds are disbursed, then you may receive your stimulus funds through direct deposit information that the IRS has on file for you, or through a check or prepaid card in the mail.
Jackson Hewitt does not have the ability to view your EIP history or to access your account with the IRS. Please visit irs.gov for the latest updates and guidance regarding the latest round of EIP payments, when available.
HOW WILL I GET MY THIRD STIMULUS?
Jackson Hewitt does not have the ability to view your EIP history or access your account with the IRS. The IRS has not issued guidance on EIP3 payments yet.
The IRS is not allowing disbursement changes for the third stimulus.
The IRS will issue a check or card if Direct Deposit is not available.
The IRS will use the mailing address on file from your tax year 2020 return or your 2019 return (whichever is the most recent one processed by the IRS at the time your stimulus payments are disbursed).
Once the IRS has issued your EIP3 payment, you will be able to check the status using Get My Payment at irs.gov. (Get My Payment will be available beginning March 15. Prior to your EIP3 being issued, it will say “payment status not available.”)
No. Like the first and second stimulus payments, the third EIP is not considered taxable income. They are actually an advance on a tax credit called the Recovery Rebate Credit.
The third check will be reconciled on the 2021 tax return.
At this time there are no more stimulus payments planned. Jackson Hewitt keeps an eye on any potential tax law changes throughout the year, so you can rest assured that we will have the information available as it is provided.
Beginning in tax year 2021(the taxes you file in 2022) the Child Tax Credit will be expanded. The bill increases the amount that families claiming the Child Tax Credit receive from $2,000 to:
The credit is now fully refundable – that means that you are eligible for the credit even if you don’t owe taxes.
All student loan debt forgiven passed between December 31, 2020, and January 1, 2026, is tax-free.
This is to allow a future executive action to forgive any amounts of student loan debt to be a tax-free event.
About the Author
Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.