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Covid-19 Impact

American Rescue Plan Act of 2021: Frequently Asked Questions About the Third Stimulus and Changes to Tax Credits

Jo Willetts, EA Director, Tax Resources Published On March 12, 2021

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UPDATED ON: March 15, 2021

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.

How much will my third stimulus check be? Will the third stimulus check include dependents?

The payment amounts for the third round of stimulus are as follows:

  • $1,400 per eligible taxpayer
  • $2,800 per eligible married couples—$1,400 per person
  • $1,400 per qualifying dependent with an SSN or ATIN—both a child and a non-child dependent, regardless of age

 

What tax year will the third stimulus payment be based on?

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.

 

Who will qualify for the third stimulus check?

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.

 

What are the income limits for the third round of stimulus?

The maximum income for the full credit is:

  • $75,000 for Single/Married Filing Separately taxpayers
  • $150,000 for Married Filing Jointly taxpayers
  • $112,500 for Head of Household

The credit phases out between:

  • $75,000 and $80,000 for Single/Married Filing Separately taxpayers
  • $150,000 and $160,000 for Married Filing Jointly taxpayers
  • $112,500 and $120,000 for Head of Household taxpayers

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.

 

Will people who have died since the second stimulus payment was issued receive this third payment?


Those who died before January 1, 2021, are not eligible for this third round of stimulus.

 

Will people who do not have a Social Security number, but instead have an Individual Taxpayer Identification Number (ITIN), receive a stimulus payment?

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. 

 

When will the government start issuing the third stimulus payments?

The IRS began issuing the third stimulus payments on March 12, 2021.

 

Where will my third stimulus check be sent?

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?

Have you received your tax refund for tax year 2020?
How did you get your 2020 tax refund?
Did you receive a Refund Advance and/or an Assisted Refund when you filed your 2019 tax return in 2020?
How did you get your 2019 tax refund?
How did you get your 2019 tax refund?

You will likely receive the third stimulus payment via a check or prepaid card in the mail.

You will likely receive the third stimulus payment via your Serve card.

You will likely receive the third stimulus payment via Direct Deposit.

You will likely receive the third stimulus payment via Direct Deposit.

You will likely receive the third stimulus payment via a check or prepaid card in the mail.

Please note that this may vary depending on whether you updated your payment information on the IRS' Get My Payment portal.

You will likely receive the third stimulus payment via your Serve card.

Please note that this may vary depending on whether you updated your payment information on the IRS' Get My Payment portal.

How do I update my Direct Deposit information?

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.

 

Can I change my disbursement method?

The IRS is not allowing disbursement changes for the third stimulus.

 

Do I need to have direct deposit in order to get the stimulus payment?

The IRS will issue a check or card if Direct Deposit is not available. 

 

How will the government determine where to send my stimulus payment? Will I be able to update my banking or address information?

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).

 

How do I find the status of my stimulus check?

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.”)

 

Is the third stimulus payment taxable?

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.

 

Will I need to claim the third stimulus check on my 2020 or 2021 income tax return?

The third check will be reconciled on the 2021 tax return.

 

Will more stimulus checks be coming this year?

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.

 

How does the American Rescue Plan change the Child Tax Credit (CTC)?

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:

  • $3,600 for each child under 6
  • $3,000 for each child age 6-17

The credit is now fully refundable – that means that you are eligible for the credit even if you don’t owe taxes.

  • Although this credit is for next year’s tax filings, payments will also be sent in advance, over the course of the year, beginning no earlier than July 2021 so people don’t have to wait to file their  2021 taxes. The IRS will likely determine eligibility based on your most recent tax filing.

 

How does the American Rescue Plan change unemployment insurance for 2020?

  • The first $10,200 in unemployment income from 2020 is tax-exempt.
  • Households with an income greater than $149,999 will not qualify.

 

How does the American Rescue Plan change Pandemic Unemployment Insurance Payments for 2021?

  • $300 per week through September 6, 2021

 

How does the American Rescue Plan impact Student Loan Debt Forgiveness?

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 25 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.

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