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 separateUnder $75,000$75,000–$80,000Over $80,000
Head of householdUnder $112,500$112,500–$120,000Over $120,000
Married, filing jointly Under $150,000$150,000–$160,000Over $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 notContinue 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

10 Tips to Help You Choose a Tax Return Preparer

Many people look for help from professionals when it’s time to file their tax return. If you use a paid tax preparer to file your federal income tax return this year, the IRS urges you to choose that preparer carefully. Even if someone else prepares your return, you are legally responsible for what is on it.

Here are ten tips to keep in mind when choosing a tax return preparer.

1. Check the preparer’s qualifications. All paid tax return preparers are required to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer belongs to a professional organization and attends continuing education classes. The IRS maintains a database of tax return preparers here that you can check. In addition, here on TaxFirms.com, we have maintain a directory of tax professionals whose licensure has been verified. At the very least, choose a preparer that participates in the IRS Annual Filing Season Program.

2. Check on the preparer’s history. Check with the Better Business Bureau to see if the preparer has a questionable history. Also check for any disciplinary actions and for the status of their licenses. For Certified Public Accountants, check with the state boards of accountancy, including looking up the CPA in CPAVerify. For attorneys, check with the state bar associations. For Enrolled Agents, check with the IRS directly.

3. Ask about service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers can. Also, always make sure any refund due is sent to you or deposited into an account in your name. Taxpayers should not deposit their refund into a preparer’s bank account.

4. Ask to e-file your return. Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. IRS has safely and securely processed more than one billion individual tax returns since the debut of electronic filing in 1990.

5. Make sure the preparer is accessible. Make sure you will be able to contact the tax preparer after you file your return, even after the April 15 due date. This may be helpful in the event questions arise about your tax return.

6. Provide records and receipts. Reputable preparers will request to see … Continue reading