Following the approval of the American Rescue Plan Act, the first batch of recovery rebates ("EIP3") were sent by direct deposit this past weekend. This provides individuals with a $1,400 recovery rebate credit (or $2,800 for married taxpayers filing jointly) plus $1,400 for each dependent for 2021. Eligible families will get a payment based on all of their qualifying dependents claimed on their return, including older relatives (college students, adults with disabilities, parents and grandparents).
Phaseout of credit. The amount of the credit is ratably reduced (but not below zero) for taxpayers with adjusted gross income (AGI) over:
- $150,000 for a joint return;
- $112,500 for a head of household; and
- $75,000 for all other taxpayers.
The credit is completely phased out (reduced to zero) for taxpayers with AGI over:
- $160,000 for a joint return;
- $120,000 for a head of household; and
- $80,000 for all other taxpayers.
An additional batch of payments will be sent in the coming weeks by direct deposit or through the mail as a check or debit card.
No action is needed by most taxpayers. The payments will be automatic. The IRS will use available information to determine the eligibility for, and the amount of, EIP3. The IRS will look first to the taxpayers':
- 2020 tax return
- 2019 tax return if the 2020 has not been submitted and processed
The information entered into the IRS's Non-Filers portal if the individual or couple did not file a 2020 or 2019 tax return.
In addition, the IRS will automatically send EIP3 to people who didn’t file a return but receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) or Veterans Affairs benefits. This is similar to the first and second rounds of Economic Impact Payments, often referred to as EIP1 and EIP2.
In many cases, taxpayers will receive the payments in the same way they received the first and second round of EIP in 2020.
This EIP3 is considered as advance rebate of credit during 2021. Each individual who was an eligible individual for 2019 is treated as having made an income tax payment for 2019 equal to the advance refund amount for 2019. The "advance refund amount" is the amount that would have been allowed as a credit for 2019 had the credit provision been in effect for 2019.
However, if a taxpayer has filed his or her 2020 tax return when IRS determines the amount of the rebate, information on that 2020 return is used to determine the amount of the rebate.
The IRS also utilizes an "Additional Payment Determination Date" (APDD) to determine if any additional payments are due taxpayers who file their 2020 tax return by that date.
The APDD is the earliest of:
- The date which is 90 days after the 2020 calendar year filing deadline, or
- September 1, 2021