Earlier this week, the latest details of the third COVID-19 relief package were released. The package, which is expected to pass Congress in the coming weeks, includes a $1,400 stimulus payment for individuals and both child and non-child dependents. Let’s breakdown the details of what we know so far.
Value of the proposed third stimulus payment
According to information released by the House Ways and Means Committee, the proposed third round of stimulus payments would pay out up to $1,400 to individual Americans. As with the first and second payments, there are also income thresholds in place.
As a Single filer, if you make less than $75,000 in adjusted gross income (AGI) you’ll receive the full stimulus amount of $1,400. If you are married filing jointly, you will receive the full stimulus amount if you earn less than $150,000 in AGI.
The payments phase out for people with incomes above those thresholds. While the phase outs occurred for the first and second stimulus payments, the phase out rate for the third payment is much faster. Single filers with an AGI above $100,000 and married couples with an AGI above $200,000 would not be eligible for any payments.
Third stimulus payment qualifications for dependents
The previous stimulus payments limited the inclusion of dependents to child dependents, meaning those who were under the age of 17. With the third round of stimulus payments, individuals who claim children or non-child dependents are eligible to receive stimulus money for each. Non-child dependents include college students, disabled adults, and older Americans who are claimed as a dependent for tax purposes.
That means if you have a child under the age of 17 who you claim as a dependent on your tax return, you’ll receive $1,400 in stimulus funds for each child you claim. Also, if you have non-child dependents as described above, they’ll qualify you to receive an additional $1,400 each.
Timing of the proposed third stimulus payment
The third round of stimulus payments is still several weeks away from being signed into law. Therefore, you shouldn’t expect to receive any stimulus funds for a while. Lawmakers and analysts have stated it is likely a bill could be passed by mid-March.
If the bill is signed into law, the IRS then will direct stimulus payments to eligible households. Payments will be sent out via direct deposit, paper check, or prepaid debit card dependent upon the information the IRS has on file for each eligible recipient.
File now to help get your third stimulus payment faster
While Congress is busy working to pass legislation on a third stimulus bill, there is one thing you can do now to help prepare the IRS to send your payment – file your 2020 tax return.
If the IRS is told to send stimulus funds out, they will need your current bank account details, mailing address, and dependent information to know how to accurately calculate your payment and send it to you. Without that information, your payment could be delayed. If the IRS does not have your current bank account on file, they’ll send your payment as a paper check or prepaid debit card which will take much longer to reach you than using direct deposit.
For most, filing as soon as possible is the best route to ensure the IRS sends the correct amount of stimulus money to you. If your return is not filed by the time the IRS sends out the proposed third stimulus payments, it will use your 2019 tax data to calculate the payment. In some cases, that could result in a lower payment than what is deserved.
For instance, if your income in 2020 was significantly lower than 2019, you could qualify to receive a higher stimulus payment. Filing your 2020 tax return will give the IRS your recent income information so they know how much to send you. Similarly, if you added a new dependent to your tax situation in 2020, it’s important to make the IRS aware of that life change so that they can account for that dependent when they calculate your stimulus payment.
The IRS is urging all tax filers to submit their 2020 returns as soon as possible so they have the right information on file to get payments out to Americans as quickly as possible.
TaxAct is up to date with all latest tax law changes and can help submit your correct information to the IRS. Start filing today. If you need extra help, connect with a CPA or other tax expert using TaxAct Xpert Help and get one-on-one tax advice when you need it.
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