The Third Economic Impact Payments
In the American Rescue Plan Act of 2021, the third round of Economic Impact Payments were authorized as an advance payment of the tax year 2021 Recovery Rebate Credit.
The IRS started issuing the third Economic Impact Payments to eligible individuals on March 12, 2021 and will continue to do so throughout the year as tax returns are processed. To find out when you might be receiving the payment, click here.
If you are eligible you won’t need to take additional steps to receive a third payment. However, due to new income limitations, some individuals won’t be eligible for the third Economic Impact Payment even if they received the first or second one.
Generally, a person is eligible for the full amount of the third payment if they:
- are a U.S. citizen or U.S. resident alien (and their spouse if filing a joint return), and
- are not a dependent of another taxpayer and
- their adjusted gross income (AGI) is not more than:
– $150,000 if married and filing a joint return or if filing as a qualifying widow or widower
– $112,500 if filing as head of household or
– $75,000 for eligible individuals using any other filing status
Payments will be phased out – or reduced — above those AGI amounts. This means people will not receive a payment if their AGI is at least:
- $160,000 if married and filing a joint return or if filing as a qualifying widow or widower
- $120,000 if filing as head of household
- $80,000 for eligible individuals using any other filing status
For people who do not normally file a tax return, you may qualify for stimulus payments. If you are eligible and did not receive the first or second payment, click here. You will need to file a 2020 tax return.
Amount of third payment
The third Economic Impact Payment is:
- $1,400 for an eligible individual with a valid Social Security number ($2,800 for married couples filing a joint return if both spouses have a valid Social Security number or if one spouse has a valid Social Security number and one spouse was an active member of the U.S. Armed Forces at any time during the taxable year)
- $1,400 for each qualifying dependent with a valid Social Security number or Adoption Taxpayer Identification Number issued by the IRS
Receiving your payment
Most eligible individuals will get their third Economic Impact Payment automatically and won’t need to take additional action. The IRS will use available information to determine your eligibility and issue the third payment to eligible people who:
- filed a 2020 tax return
- filed a 2019 tax return if the 2020 tax return has not been submitted or processed yet
- did not file a 2020 or 2019 tax return but registered for the first Economic Impact Payment with the Non-Filers tool in 2020
- are federal benefit recipients who do not usually file a tax return.
Differences from previous payments
The third payments differ from the earlier payments in several respects:
- Income phaseout amounts changed. Payments begin to be reduced for individuals with adjusted gross income of more than $75,000 (or $150,000 if married filing jointly). The reduced payments end at $80,000 for individuals and $160,000 for married filing jointly. People above these levels will not receive any payment.
- Payment amounts are different. Most families will get $1,400 per person, including all dependents claimed on their tax return. Typically, this means a single person with no dependents will get $1,400, while married filers with two dependents will get $5,600.
- Qualifying dependents expanded. Unlike the first two payments, the third payment is not restricted to children under 17. Eligible individuals will get a payment based on all of their qualifying dependents claimed on their return, including older relatives like college students, adults with disabilities, parents and grandparents.
Davis & Hodgdon Associates CPAs has been assisting individuals and businesses throughout Vermont and New England for more than 30 years so please reach out to us in Williston (802-536-1831) or Rutland (802.775.7132) to talk with a tax professional today about your Economic Impact Payment. You can also email us at [email protected].
Resource: Third Economic Payment by the IRS