What we know as Stimulus Checks are officially known as the Recovery Rebate Credit. This stimulus was designed to get American taxpayers an infusion of cash to combat the negative impacts the COVID virus has had on jobs and income. However, according to the Tax Policy Center, “nearly 40% of people at or below the poverty level said they didn’t receive a check”. If that many of the neediest didn’t receive the checks, what was the benefit and how do we get them their payments?
The Recovery Rebate Credit was to be paid in two rounds of payments. The basics of these payments were $1,200 in the first round paid Summer of 2020 and a second round paid recently in the December 2020-January 2021 timeframe. These payments had an income phase-out that began at $75,000 for single filers and $150,000 for those filing Married Filing Jointly. The payments should phase out by income of $99,000 for singles and $198,000 for married filers
These two rounds of payments were designed to get money in the hands of Americans early, and then a reconciliation would be done on the 2020 tax return. The payments would be generated based on income reported on 2018 or 2019 returns. Any short fall would be paid to the taxpayer through their 2020 return. An exciting fact is that any excess paid in these initial payments would not have to be returned if the 2020 return showed they received too much.
The IRS has run into a stumbling block that is delaying the 40% who didn’t receive their checks. Due to programming issues to account for these new credits, the IRS will not be accepting tax returns until at least February 12th. This creates a significant delay in taxpayers getting their refund. When filing for 2020 does open, make sure to file electronically if at all possible. Paper filing takes more time, and per a CNBC report, as of January 15th, the IRS still had 7.1 million returns to process from prior periods.
To assist in the reconciliation between the checks received and the credit you are due, the IRS is working towards adding the Stimulus payment amounts to your taxpayer account at the IRS. To establish this account, you can use the link: www.irs.gov/payments/view-your-tax-account.
We are probably not done with Stimulus payments though. The government is in discussions for additional payments between $1,400 and $2,000. If you get another payment, what are your plans? Make sure to plan ahead for this payment and spend it or save it in a way that will benefit your personal financial plan.