Last week, President Biden signed the most recent government stimulus bill, the American Rescue Plan Act of 2021.  This $1.9 trillion stimulus package was passed with hopes of speeding up an economic recovery due to the Pandemic.  Two key elements of the bill focused on addressing unemployment benefits and issuing a third stimulus payment for qualifying taxpayers.

With federally assisted unemployment benefits set to expire the week of March 14, this bill extends the subsidized program until the week of September 6.  People collecting state unemployment benefits and Pandemic Unemployment Assistance (PUA) will continue to receive the additional federal unemployment assistance of $300 per week in addition to the state unemployment benefit for an additional six months.

Furthermore, for the 2020 tax year, taxpayers can exclude their first $10,200 of unemployment benefits received in 2020 from their taxable income on their tax return.  To qualify, the taxpayer’s modified adjusted income on the tax return must be less than $150,000.  For joint filers, each spouse will separately qualify for the $10,200 exclusion.  As of now, this exclusion is for tax year 2020 only.  This exclusion is only for federal taxes and each state will need to determine if they will allow the exemption as well.  For taxpayers that have already filed their 2020 tax return and qualify for this exclusion, an amended tax return can be filed to claim the benefit.

A third round of stimulus checks is also part of the package.  Beginning the weekend of March 13, the government began sending out stimulus checks in the amount of $1,400 per person.  This special payment is not income but is an advance payment of the 2021 Recovery Rebate Tax Credit to be included on taxpayers’ 2021 federal tax returns.  The prior two stimulus checks excluded dependents over the age of 16.  Stimulus checks being sent under this bill include all dependents listed on a taxpayer’s tax return – children over the age of 16 as well as parents and others that qualify as dependents for a taxpayer.

Phase out of the checks are based upon filing status and income levels:

  • For a single filer the income phase-out range is between $75,000 – $80,000
  • For a joint filer the income phase-out range is between $150,000 – $160,000
  • For a head of household filer the income phase-out range is between $112,500 – $120,000

The income threshold for taxpayers will be based upon the 2020 tax return, if already filed.  If the 2020 tax return has not been filed yet then then the threshold will be based upon the taxpayer’s 2019 tax return.  If your income is above the phase-out range in 2020 but below the range as reported on your 2019 tax return, then you should consider delaying your 2020 tax return filing until your stimulus check is received.

If the IRS has a taxpayer’s bank info from a prior tax return, the payment will be via direct deposit.  Otherwise, a check or debit card will be sent to the recipients.  Taxpayers can check the status of their stimulus payment by going to the following IRS link: Get My Payment | Internal Revenue Service (irs.gov)

 

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