The information in this article was last updated on Jan. 6, 2021. This article relates to the tax laws enacted during the COVID-19 pandemic, specifically the Economic Impact Payments. These laws may have expired or reverted to their original state. For additional information about these payments, read this IRS release.
How much can my clients expect to receive on their second stimulus check?
Individuals who make $75,000 or less can expect to receive $600 this time. That means that married couples filing jointly who make $150,000 or less will receive $1,200. Dependents under age 17 who meet the requirements for a qualifying dependent will also receive $600, meaning a family of four will receive $2,400. (See: Sec 6428A(a)(2) – Additional 2020 Recovery Rebates for Individuals)
How can my clients get their stimulus check?
Your client can receive their payment by direct deposit or check sent through the mail. The IRS plans to use the bank information and addresses they collected during the first round of stimulus payments to deliver the money to your clients faster.
If your client’s main source of income is Social Security, they will receive their payment by check or Direct Express, whichever they received last time.
When can my clients expect to receive their stimulus check?
The IRS and the Treasury Department will begin sending out the second stimulus payments on December 30, 2020. Some of your clients may see a direct deposit as pending until the official payment date of January 4, 2021. However, they will not need to take any action to receive their payment.
Will my client need to file their 2020 taxes before they can receive their stimulus check?
No. At this time, the IRS will use the information from your client’s 2019 tax return to determine how much they will receive.
Other groups who may not have filed a 2019 tax return but will likely receive payments include:
- Seniors who receive Social Security payments as their main source of income
- Railroad retirees
- Veterans who receive disability payments as their main source of income
(See: Sec 6428A(e)(5) – Application to Certain Individuals Who Do Not File a Return for 2019)
Will my client owe taxes on this second stimulus check?
No. Stimulus payments are not subject to federal taxes.
What if my client’s life situation changed in 2020?
The IRS will use the information from your client’s 2019 tax return to determine how much they will receive.
If your client has taken a pay cut or lost their job due to COVID-19, they may be eligible for this second round of stimulus payment even if they weren’t eligible for the first. If your client’s 2020 income is within the $75,000 or $150,000 limit, you may be able to help them claim the Recovery Rebate Credit on their 2020 tax return.
What if my client is still waiting for the first stimulus payment?
You can direct your client to the IRS Get My Payment online tool to check their payment status.
If your client never received their first payment, you can help them claim it on their 2020 tax return. Fill out line 30 on Form 1040 to claim the Recovery Rebate Credit.
Does this bill include provisions for my clients who are on unemployment?
Yes, this bill provides an additional $300 per week for anyone receiving unemployment benefits through March 14, 2021. It also extends the Pandemic Unemployment Assistance program and the Pandemic Emergency Unemployment Compensation program. These programs protect and give expanded coverage to the self-employed and federally funded unemployment benefits.
How does this bill compare to the CARES Act?
The CARES Act enacted in April 2020 distributed $1,200 per qualifying individual and $500 per qualifying dependent. This new stimulus bill provides $600 for qualifying individuals and dependents.
What are some of the other provisions in this new stimulus bill?
Earned Income Tax Credit and Additional Child Tax Credit
The new bill allows your clients to elect to use their 2019 earned income instead of 2020 to calculate both the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (AOTC). This way if your client had lower income in 2020 due to job loss, unemployment, or cut wages they will still be eligible for these credits if they claimed them last year.
You can use this calculator from the IRS to help your clients calculate their EITC credit.
Self-employment
The new bill also allows your self-employed clients to calculate their sick leave and family leave using their 2019 income. This will allow more of your clients to claim the refundable credit found on Form 7202, including those who could not work due to getting COVID-19 or lack of childcare. (See: Sec 287 Election to Use Prior Year Net Earnings from Self-employment in Determining Average Daily Self-Employment Income for Purposes of Credits for Paid Sick and Family Leave)
