Could I End Up Having To Pay Any Of It Back
Conceivably, yes.
A taxpayer may receive too much money from the advance payments in certain situations, such as a change in income or filing status, or if they no longer claim a child as a dependent.
This could cause you to owe money at tax time or reduce your refund.
But the legislation mitigates the danger in a couple of ways. First, only half of the credit is paid in advance. And the law also says that if the wrong amount was paid because of changes in the number of qualifying children, up to $2,000 per child would not need to be paid back by taxpayers who fall below certain income thresholds: $40,000 for a single taxpayer, $50,000 for a head of household, and $60,000 for joint filers. People whose income is above those thresholds may receive partial protection, which phases out as they earn more, tax experts said.
The stimulus package requires the establishment of an online portal to allow taxpayers to opt out of receiving advance payments and update information about their income, marital status and number of qualifying children.
Whats In The $19 Trillion Stimulus Package
On Wednesday, President Biden’s $1.9 trillion stimulus package cleared its final hurdle in Congress. Having already passed through the Senate, the House of Representatives approved the plan by 220 votes to 211 with no Republicans voting in favor. It will now head to Biden’s desk where it will be signed into law. Known as the American Rescue Plan, the relief bill is one of the largest federal aid packages since the Great Depression and its approval marks a considerable victory for Biden.
It contains a range of measures such as a further round of direct payments to American taxpayers amounting to more than $400 billion. Checks of $1,400 will be sent to individuals making up to $80,000, single parents earning $120,000 or less and couples with household incomes of no more than $160,000. $246 billion is being allocated to extend unemployment programs with federal unemployment payments of $300 per week now extended until September 06.
$350 billion is being allocated to state and local governments while education will receive nearly $180 billion to support measures such as school reopenings. The Covid-19 response is also going to be boosted by a further $123 billion. Democrats tried to include plans to raise the federal minimum wage from $7.25 an hour to $15 per hour but those proposals became bogged down in the Senate and they failed to make it into the final bill.
*Click below to enlarge
Composition of the American Rescue Plan Act
Statista
Advance Child Tax Credit
Even if you dont pay any taxes, you may qualify for a refund of the CTC.
The CTC was expanded under the American Rescue Plan Act of 2021 for tax year 2021 only. If you are eligible, you should have begun receiving advance Child Tax Credit payments on July 15. The payments will continue monthly through December 2021. Under ARPA, families are eligible to receive:
- Up to $3,000 per qualifying child between ages 6 and 17
- Up to $3,600 per qualifying child under age 6
The Internal Revenue Service began sending out letters in early June to more than 36 million families who may be eligible for the monthly payments. Most families do not need to do anything to get their payments, as long as theyve filed their 2020 or 2019 tax return. Learn more about the letter and how it can help you determine your eligibility.
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What Didn’t Make It: $15 Minimum Wage
President Joe Biden’s initial plan called for increasing the national minimum wage to $15 per hour by 2025, more than doubling the current rate and increasing wages for an estimated 27 million workers. But the controversial proposal lacked support among key moderate Democrats in the Senate.
Last month, the Senate parliamentarian ordered the wage rise be removed from the bill. She said it did not meet the guidelines necessary to be included under the budget process Democrats plan to use to advance the aid package.
AZ: In the end, it was the Senate parliamentarian who killed the minimum wage increase, ruling that it would take 60 votes to pass. At the moment, just isn’t that kind of support in the Senate for a $15 wage – or among Democrats to overrule the parliamentarian – but the door is still open to a compromise on a lower minimum outside of the Covid relief package.
Republican support: 1/5
Progressives Show Patience With Biden At Least Until Relief Bill Passes
One much-discussed proposal that didn’t make the final cut was an increase in the minimum wage. Progressive Democrats vigorously pursued including a minimum wage hike in this legislation, which would have gradually increased the federal minimum wage to $15 an hour by 2025. But the nonpartisan Senate parliamentarian ruled that including such a provision does not align with the complicated rules over budget bills, so it is not in the final legislation.
Here’s a closer look at some of the big-ticket provisions in the Senate-amended bill that Biden has signed.
Direct payments
The bill allocates funds for a third economic impact payment to qualifying Americans.
Individuals earning up to $75,000 and couples earning up to $150,000 will receive the full direct payments of $1,400 per person. Individuals will also receive an additional $1,400 payment for each dependent claimed on their tax returns.
Senate Democrats agreed to lower the income cutoff at which payments phase out from $100,000 to $80,000 for individuals, and from $200,000 to $160,000 for couples filing jointly, following demands from moderate Democrats.
Unemployment benefits
Under the Senate version that Biden signed, federal unemployment insurance payments will remain at $300 per week down from $400 per week in the earlier package passed by the House. The benefits will extend through Sept. 6. The Senate’s bill makes the first $10,200 in unemployment payments nontaxable for households with incomes under $150,000.
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You Could Get A Third Stimulus Check
The package provides for a third round of stimulus checks, formally called Economic Impact Payments, in the amount of $1,400 per person .
The IRS will calculate the stimulus amounts based off of people’s 2019 or, if they’ve already filed, their 2020 tax returns. The checks are tied to adjusted gross income, which is your income after deductions like retirement plan contributions. Single filers who earn $75,000 or less and couples earning $150,000 or less qualify for the full payments. Over those income thresholds, the amount decreases, zeroing out at $80,000 .
Americans who qualify will also receive $1,400 per dependent, a category that includes not only children but also college students and adult dependents. This is a departure from the previous stimulus payments, which left out dependents age 17 and over.
These $1,400 payments, combined with the $600 checks distributed in January, are meant to reach the $2,000 sum promised by the Biden administration. They come about a year after the CARES Act first approved $1,200 payments to help people through the pandemic last spring.
As far as the timeline for the third stimulus check, White House Press Secretary Jen Psaki said Monday that Treasury Secretary Janet Yellen is “focused like a laser” on making sure the aid “gets out as quickly as possible.”
What Is The American Rescue Plan
The American Rescue Plan Act of 2021 is a $1.9 trillion coronavirus rescue package designed to facilitate the United States recovery from the devastating economic and health effects of the COVID-19 pandemic. The nearly $2 trillion price tag makes this economic rescue legislation one of the most expensive in U.S. history. It one part of President Biden’s Build Back Better plan, which also includes the American Jobs Plan and the American Families Plan.
The package includes direct stimulus payments of $1,400, extending unemployment compensation, continuing eviction and foreclosure moratoriums, and increasing the Child Tax Credit while making it fully refundable. It provides funds for state and local governments to help compensate for lost tax revenues, money for schools from kindergarten through eighth grade to safely reopen amid the pandemic, and subsidizes COVID-19 testing and vaccination programs.
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Your Obamacare Policy Will Become More Affordable
The new law will lower health insurance costs for millions of Americans who buy individual or family policies through the Affordable Care Act, also known as Obamacare. It will temporarily cap premium costs at 8.5% of income for all consumers, including those whose incomes fall above the threshold for government premium subsidies.
This means that consumers making more than 400% of the federal poverty level or $51,520 for an individual in 2021 will see their premium costs contained for the first time since the laws inception. Having to pay the full cost of coverage often put health insurance out of reach, even for more affluent households. Those with lower incomes who currently qualify for subsidies will receive even more assistance under the American Rescue Plan, lowering their premium costs further.
Older Americans pay the highest premium costs, so they will see the biggest savings under the bill. A 64-year-old with an income of $58,00 would save nearly $8,000 annually on premium costs, according to a Health Affairs analysis of Congressional Budget Office projections.
Whats more, under the new law the government will subsidize the cost of COBRA coverage through the end of September, so those who leave their jobs or are laid off dont need to pay full price to continue their employer-sponsored coverage through that time.
Child Tax Credit: July 15 Deposits
Some families received another form of stimulus aid on July 15 when the IRS deposited the first of six monthly cash payments into bank accounts of parents who qualify for the Child Tax Credit . Families on average received $423 in their first CTC payment, according to an analysis of Census data from the left-leaning advocacy group Economic Security Project.
Eligible families will receive up to $1,800 in cash through December, with the money parceled out in equal installments over the six months from July through December. The aid is due to the expanded CTC, which is part of President Joe Biden’s American Rescue Plan.
Families who qualify will receive $300 per month for each child under 6 and $250 for children between 6 to 17 years old. Several families that spoke to CBS MoneyWatch said the extra money would go toward child care, back-to-school supplies and other essentials.
Families may enjoy more of a tax break in coming years, if Mr. Biden’s American Families Plan moves forward. Under that plan, the Child Tax Credit’s expansion would last through 2025, giving families an additional four years of bigger tax breaks for children.
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What If I Am Newly Eligible For A Stimulus Payment Based On My 2020 Income But I Havent Filed My 2020 Return
You could try to file it quickly, in hopes of receiving your payment faster. But theres no guarantee your return will be processed quickly enough, and haste can lead to errors.
And you dont have to rush: The law includes a provision for the Treasury Department to make supplemental payments by September. If you dont get one then, you can claim the $1,400 when you file your 2021 taxes.
Funds For Local Governments
Unlike prior stimulus packages, this one provides $350bn for local governments, many of which are facing higher expenses and lower revenues due to the economic downturn.
But Republicans have fought it as a handout to primarily Democratic states, noting research that shows that the budget situation in many states is better than expected. California even has a surprise surplus.
The Democratic plan would send at least $500m to every state, with additional funds determined by the number of jobless workers. Cities and countries, tribes and territories are also in line for money.
AZ: This has been one of the big political battlegrounds in every Covid-19 stimulus bill. Republicans have been able to successfully block aid to states and cities in the past, saying they were a handout to high-tax liberal enclaves. This time around, however, they don’t have the votes to stop it.
Republican support: 1/5
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Paid Leave And Health Insurance Help
The plan provides incentives to employers to offer paid sick leave to staff who contract Covid-19, are exposed to the virus and must quarantine or are caring for sick family members. But it does not make leave a requirement, as initially proposed.
It also aims to make it easier for more people to buy health insurance independently.
AZ: Republicans have been OK with providing temporary support for those directly affected by the coronavirus pandemic. They balk, however, at more money going to the government workforce – and the thought that this could be a back door to a permanent federally mandated family leave programme.
Republican support: 2/5
Vaccines Funerals Farmers And Food
The bill includes a funding surge to help put vaccine shots in Americans’ arms.
It includes $14 billion to distribute and administer vaccinations, $48 billion for testing and contact tracing and $50 billion for Federal Emergency Management Agency relief. As part of the FEMA aid, the government will cover costs of “disaster-related” funeral expenses connected to the pandemic.
It includes loan assistance for “socially disadvantaged” farmers and ranchers who belong to groups that have faced ethnic or racial discrimination.
And it extends a 15 percent boost in SNAP benefits, commonly known as food stamps, through the end of September.
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How Are Separated Spouses Be Affected
This applies only if the taxpayer lived with a qualifying child for more than half of the taxable year and didnt have the same principal home as the spouse at least six months of the year. A separation decree or agreement would also suffice, as long as the individual didnt live with the spouse by the end of the taxable year.
This change will be permanent.
Will The Irs Tax My Third Stimulus Check
The IRS does not consider stimulus checks to be taxable income. This means that you do not have to report the money on your federal income tax return, or pay income taxes on your stimulus check.
You should also note, that if you owe taxes, you could still qualify to get a stimulus payment because the IRS does not use it to offset federal or state tax debts like it normally does with tax refunds.
For private debts, however, the American Bankers Association has pointed out a loophole in the new stimulus plan where banks and other financial services providers will be legally required to comply with court ordered garnishments. The association says that without legislation to shield your third stimulus payment, creditors or collectors can take it to pay off existing debt.
As a reference, the 2020 COVID-Related Tax Relief Act did shield stimulus payments from private debt collection: The Advance payments are generally not subject to administrative offset for past due federal or state debts. In addition, the payments are protected from bank garnishment or levy by private creditors or debt collectors.
But while your stimulus money could be taken to pay for private debt, the new offsetting rules prevent the IRS from deducting overdue child support from eligible recipients. You should keep in mind, however, that the IRS intercepted or reduced payment from the first round of stimulus checks for past-due child support.
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State And Local Government
The American Rescue Plan includes $350 billion in aid to states, cities, tribal governments, and U.S. territories. These funds are designated to help replace lost tax revenue due to the pandemic. Analysis by The Washington Post found that a majority of states experienced revenue declines between December 2019 and December 2020.
How Is The Third Stimulus Check Calculated
The stimulus plan mandates the treasury to rely on 2019 and 2020 tax returns to calculate how much you could get for the third round of stimulus checks.
Congress approved limits based on adjusted gross income ranges. This means that taxpayers making less than the minimum threshold could get the full stimulus check, while those earning above it get reduced payments until they are fully phased out at higher incomes.
You can find your AGI on IRS form 1040. This is calculated by subtracting deductions like student loan interest, health savings account payments, and contributions to a traditional IRA from your gross income.
By contrast, your gross income is the total amount of money that you made during the tax year, including wages, dividends, capital gains, rental property income and other types of revenue.
Your 2019 taxes had to be filed by July 15, 2020. And your 2020 taxes are due by the extended deadline of May 17. You can read more about when to file your tax returns for the third stimulus check, and other IRS requirements in two tax sections below.
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$1400 Checks For Most Americans
Individuals making less than $75,000 per year will receive $1,400 direct payments, bringing the total from the second stimulus and the new measure to $2,000 the amount promised by many Senate Democrats in the December round of negotiation. As in prior rounds, the tiers of eligibility still stand: Heads of household earning less than $112,500 and married couples filing jointly who earn less than $150,000 will also get the full sum. The White House states that those with direct deposit info registered by the Treasury Department and the IRS could receive their checks as early as the weekend of March 13.