Shifting eligibility for stimulus checks can be confusing to taxpayers wondering if they’ll qualify for more money from the government program that pumped hundreds of billions of dollars into the economy during the pandemic.
In the rush to disburse those payments, the IRS relied on data it already had to determine eligibility. That means some people didn’t get the full amount they owed, while others didn’t get a check at all.
This filing season offers an opportunity to rectify that situation. That’s because the payments are structured as advances on a 2020 tax credit, which can now be claimed on returns.
With submission season underway, a second round of payments still pending, and a third pending, here’s what you need to know about this unusual, yet popular, emergency program.
How much should I have gotten?
Congress approved two rounds of direct payments, first in March and at the end of December.
- The payment in March was up to $1,200 ($2,400 for married joint petitioners), plus $500 for each dependent under the age of 17.
- The December payment was up to $600 ($1,200 for married joint petitioners), plus $600 for each dependent under the age of 17.
Suitability works on a sliding scale. The adjusted gross income thresholds to receive full payments are $75,000 for single applicants, $112,500 for those filing as householders, and $150,000 for married couples filing jointly.
People who earn above those thresholds may still qualify for a smaller benefit. Payments are phased out at a 5% rate, which means a $50 discount for every $1,000 you cross the threshold.
Why have I not received full payment?
To send money as quickly as possible, Congress ordered the IRS to use existing data. That meant that for the first round of payments, authorized in March, the IRS relied on reported income from tax returns from 2018 or 2019.
Relying on old data led some people to slip through the cracks, including:
- People who saw their income fall in 2020, bringing them below the thresholds outlined above.
- People who do not file an annual tax return because they do not earn enough taxable income. That includes seniors who only receive Social Security benefits.
- New parents who should have received an additional payment for a dependent.
There are also people who have accidentally thrown out physical checks or debit cards with their payment. Some of the early rounds of payment — which were sent as debit cards — were sent in generic envelopes in an effort to prevent theft. which some recipients understandably, but unfortunately, mistook as junk e-mail.
If you haven’t received a second payment yet, but think you have, you can check the status of your payment here.
I should have received more. What shall I do?
Submit your tax return! The sooner you file your tax return, the sooner the IRS will pay out the difference.
Pay special attention to line 30 of your Form 1040, which asks for a “Repair Discount Credit.”
The IRS is looking for you to calculate the difference between what you did receive and what you should have received. Full instructions on how to do that are available on page 58 of this document, but here’s an example:
A couple who received $3,600 in incentive money ($2,400 per couple in round one, $1,200 per couple in round two), but had their first child in 2020, could claim dependent benefits they didn’t get. One line 30, they would claim a $1,100 credit ($500 for round one plus $600 for round two).
I have more than I should have. Do I have to pay it back?
If you are lucky enough to receive a raise in 2020 that puts you above the income limit, you will not have to repay the difference.
If you want to give back some of the money you received through the program in addition or not, see these instructions from the IRS.
Will there be a third payment round?
Signs point to yes, although the details are far from determined, so don’t count on it just yet.
The Biden administration has proposed a new round of payments of up to $1,400 per taxpayer. Talks are underway about whether the next round should include tougher income restrictions.
Legislation released by the House Ways and Means Committee earlier this week would keep income thresholds the same as the last two payments, but phase out faster for those earning more. sen. Joe Manchin (DW.Va.), a Democrat who may represent the last vote needed to approve another aid package, has pushed for lower income thresholds so that payments would be phased out to $50,000 for individuals.