Category: Tax Returns

What You Need to Know About the 2021 Recovery Rebate Stimulus Payments

The President has officially signed the American Rescue Plan Act of 2021 into law. Within this new stimulus bill are a third round of a direct checks to eligible Americans, called “recovery rebates”—of up to $1,400 for every “eligible individual.”

Sounds great, right? Of course, the devil is in the details.

How Much Will You Receive?

Each eligible individual in your household should receive $1,400. Eligible individuals include:[1]

  1. You, as an individual taxpayer
  2. Your spouse (if you are filing a joint tax return)
  3. Any dependents you are claiming on your tax return, regardless of their age

For example: A married couple filing jointly and claiming three dependents on their tax return would be eligible for $1,400 x 5 = $7,000. This is the case even if the dependent is, say, an adult child in college, or a parent in assisted living.

The catch? Whether you receive a full, a partial, or no rebate depends on your Adjusted Gross Income (AGI) on your tax return:

If you are … You receive a full rebate if your AGI is … You receive a partial rebate if your AGI is … You won’t receive a rebate if your AGI is …
Single, or married filing separate Under $75,000 $75,000–$80,000 Over $80,000
Head of household Under $112,500 $112,500–$120,000 Over $120,000
Married, filing jointly  Under $150,000 $150,000–$160,000 Over $160,000

 

All this begs the question: Which AGI are we talking about? Technically, the stimulus payment is a 2021 Recovery Rebate. But like our Great American Pastime (baseball), you actually get up to three “at bats,” or years in which to qualify for a full or partial rebate.

Pitch #1: Your 2019 or 2020 Tax Return, Already Filed

Initially, the IRS will look at the AGI reported on the most recent tax return you’ve already filed, whether that’s your 2019 or 2020 return. If your AGI falls within the “full rebate” parameters above, you can expect to receive your full 2021 Recovery Rebate. Where will the money go? If the IRS has a checking account on file for you, they should be able to issue a direct deposit into that account. Otherwise, they should mail you a check or debit card to your address on file.

Note: Even if you end up reporting higher income in subsequent years, you will get to keep the full amount of any payment you receive from Pitch #1. The IRS will not… Continue reading

Federal Economic Impact Payments – Frequently Asked Questions

In response to the COVID-19 pandemic, Congress recently passed legislation authorizing stimulus payments to most Americans. These payments, called Economic Impact Payments, are being processed by the Internal Revenue Service (IRS) at the current time. Many people have questions about these payments, so this FAQ has been assembled to help you find answers.

Is the Economic Impact Payment considered to be taxable income?

No, this payment is not considered “income” by the IRS and you will not need to pay income tax on it. This payment will not effect your refund, or increase the amount you owe when you file your 2020 tax return in 2021. This stimulus payment will also have no impact on your eligibility for other federal assistance programs that use income to determine eligibility.

How can people who receive a Form SSA-1099 or RRB-1099 check their payment status?

Taxpayers can use the IRS Get My Payment tool to check on the status of their stimulus payment. This will require you to verify your identity by answering a set of security questions.

If my bank account information has changed since the last time I filed a tax return, how do I update my direct deposit information?

The Get My Payment tool at irs.gov does not allow you to change your direct deposit information. This is a security precaution to prevent these payments from being stolen by changing this information.

If the IRS sends your payment using the bank direct deposit information from your most recent tax return and the bank account information is now invalid, the bank will notify the IRS and reject the electronic transfer. The IRS will then mail you a check as soon as they are able, to your last known address. The Get My Payment tool will then be updated to reflect the date on which this check was mailed. Please note that the IRS says it may take up to 14 days to receive the payment after it’s been mailed.

Where can I get more information?

If you are required to file a tax return, you are encouraged to file electronically. You can find a tax professional in your area by searching our directory of tax firms.

If you are not required to file a tax return, you may use the Non-Filers: Enter Payment Info Here tool and submit your information to the IRS to receive an Economic Impact Payment. This online tool should only be … Continue reading

Can’t pay your 2019 tax bill by July 15, 2020?

If you have a tax bill for 2019 that you can’t quite pay, you do have options.

Even if you can’t pay in full, I’d highly encourage you to file your return on time, which has been extended from April 15 to July 15 this year due to the pandemic and resulting recession. This way, you avoid the late filing penalties that can be added on to your tax liability, which can add up to 25% of your balance due. Also, try to pay as much as you possibly can with your return. If you are going to be filing an extension, pay as much as you can with your extension.

The IRS is currently charging a 5% annual interest rate, compounded daily, on all tax debts. On top of that, you will be subject to a failure to pay penalty, which will further increase your tax debt.

It may be worthwhile to consider using credits cards or a loan to pay your tax bill. When you consider the extensive penalties the IRS charges, your credit card interest rate may actually be quite a bit lower.

If you absolutely cannot pay your tax bill this year, then use either the online payment agreement request system at irs.gov, or complete Form 9465 to request a payment plan. You are not required to wait until the IRS bills you before requesting a payment plan.

The most important thing to remember is that, in order to avoid the wrath of IRS Collections, it’s in your best interest to be proactive about managing your tax debt. Don’t wait for the IRS to come to you: Take the high road, and address it head on.

If your tax debt is simply too large for you to pay in any reasonable amount of time, it’s worth considering your other options. One of our vetted and verified tax firms near you can provide complete guidance for resolving your back tax liabilities, particularly if your situation is more complex, such as multiple years worth of tax debt to address. Search our directory using the box at the top of this page.

Don’t give the IRS the upper hand. Stay on top of your tax situation and address the issue long before the government starts coming after you.… Continue reading