10 Things to Know About the Third Round of Stimulus Payments
By Ashley Burnside
On March 11th, President Biden signed the American Rescue Plan into law, which will provide essential financial relief to individuals and families along with COVID-19 relief to states and localities. One component of the package is a third round of stimulus payments. Despite wide news coverage about these payments, many have questions about who’s eligible and how to receive the payments. These payments also have different eligibility rules than those distributed earlier. Below are ten things to know about the third round of payments:
1. The payments will be $1,400 per qualifying adult ($2,800 for married taxpayers filing a joint return) and $1,400 per dependent. For the third round of stimulus payments, taxpayers can get payments for dependents of all ages, including children over the age of 17, college students, and adults with disabilities. The taxpayer will receive the payment on behalf of the dependent, although financially independent college students and young adults who are not claimed as a dependent may be eligible for their own payment. The payments are an advance against a new credit for tax year 2021. These payments will not affect eligibility for other tax credits.
2. You can’t receive the $1,400 payment if you can be claimed as someone else’s dependent. Whether you can be claimed as someone else’s dependent is based on factors including your relationship to the filer, your age, whether you lived with your parents for more than half of the year, and whether you were financially independent for more than half of the year. This will affect many full-time college students under age 24. However, it’s important to review the rules, since not all college students are dependents. Here are more details about whether or not a child qualifies as a dependent. People who were dependents in 2019, but not 2020, can claim the Recovery Rebate credit to get their payment when they file their 2020 taxes over the next month or so.
3. You don’t need to have earned income to qualify. The full payment is available to those with little to no income. Even if you are making $0, you can still receive the full payment. The payments phase out starting at $75,000 for single filers. The phase-out rates are different than for the first and second round of payments, with individuals making $80,000 per year ineligible for any payment ($120,000 for individuals filing as heads of households, and $160,000 for couples married filing a joint rate.)
4. You must have a Social Security number to receive the payments, but members of mixed immigration-status families are eligible. Unlike the previous rounds of stimulus payments, anyone with a Social Security number can receive the payment who is otherwise income eligible. Unlike the first and second round of payments, children with Social Security numbers can get the payment even if both parents file their taxes with Individual Taxpayer Identification Numbers (ITINs). This will allow about 2.2 million children who are citizens or lawful permanent residents and who were previously left out of the payments to get critical financial support. However, filers with ITINs are still not eligible to receive the payment.
5. The IRS will use the information it already has on file from the first and second rounds of stimulus payments. The IRS will deliver payments to the same location where it sent your most recent stimulus payment (via mail or direct deposit). If you qualify for a higher payment based on your 2020 circumstances, such as your family size or income changing, you will have an opportunity to get that additional money as a Recovery Rebate Credit (Line 30 on your tax return) when you file your taxes in spring 2021, but you won’t owe money if you would have qualified for a smaller payment based on your 2020 income or family situation. You should file your taxes as soon as possible if you believe you qualify for a higher payment. Social Security recipients (both retirement and disability) will receive the payments automatically, as will Supplemental Security Income (SSI) recipients, railroad retirees, and recipients of veterans’ benefits, although they may need to fill out a form to claim dependents.
6. The payments will be automatically paid by direct deposit if you provided a bank account on your tax return. Checks will be mailed if there is no account provided. Those who have a direct deposit on file with the IRS will receive their payments faster than those getting a check by mail. This will create additional challenges for people without a permanent address. If you do not have an address on file with the IRS, you can provide an address and claim the stimulus payment when you file your taxes in spring 2021.
7. Like other tax refunds, these payments will not be counted toward eligibility for means-tested programs and will be disregarded as an asset for 12 months. This means the payments won’t jeopardize your participation in programs including Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and public housing. In addition, the rebate checks are not considered taxable income.
8. The first two payments were protected against being intercepted for debts owed to federal and state agencies, but payments provided as part of a Recovery Rebate are not. The IRS has announced that it will protect the payments from seizure for federal tax debt repayment. We encourage lawmakers to move quickly to protect the third payment from interception and garnishment to ensure that tax filers can use them to pay for their basic needs.
9. The IRS expects to start sending the payments as early as mid-March. If you are eligible and don’t receive your payment, you can claim it when you file your taxes for 2020 in spring 2021. The IRS is now accepting tax returns. This year, the tax form will include a section for filers to claim the Recovery Rebate Credit (Line 30). If you’ve filed already and didn’t get the payments, you can submit an amended return.
10. The requirement to file taxes to receive the payment will be a barrier for many people. An estimated 12 million people had not filed for their stimulus checks by October 2020, in large part because they don’t traditionally file taxes and had to file a separate form to be eligible. This is especially true given that many Volunteer Income Tax Assistance (VITA) sites that offer help with preparing taxes are closed due to the coronavirus pandemic. Public education campaigns and free online resources (such as the IRS Free File program) will be vital for helping people access these payments, especially those who have not previously filed taxes and those making little to no income.
The American Rescue Plan also includes temporary expansions to the Child Tax Credit (CTC) for families with children and to the Earned Income Tax Credit (EITC) for workers without children and for workers without children in the household. These expansions increase the credits available to tax filers and expand the ages of eligibility. But both of these expansions are for tax year 2021. The earliest you may receive the expanded CTC benefit is July 2021, when the IRS is supposed to start issuing advanced payments, and you can claim the expanded EITC when you file your taxes in spring 2022.
*updated on April 15, 2021