Economic Stimulus Payments

[Leetpurple]

My client exceeded the $75,000 limit for a single filer in 2019.  I am about to file his 2020 personal return, where  he earned less than $75,000.   The recovery rebate worksheet indicates that he will receive the $1,800 in credit.  Is that right? Will he also receive the 3rd $1,400 payment?  Thanks in advance.

[rbynaker]

Yes.

[jeffmcpa2010]

How far over the 75,000 was 2019? If it was less than 99,000 he would have received part of the first payment, If less than 87,000 would have gotten part of the 2nd as well both of which will reduce the $1800.

[qbteachmt · Accepted solution]

"Is that right? Will he also receive the 3rd $1,400 payment?"

Perhaps it would help to review what is really happening for EIP “stimulus” funds: The funds were paid out as Advanced payment against a projection. The first two payouts were projected based on 2018 or 2019 tax returns, but the eligibility is part of tax year 2020 as Actuals. You use the 2020 return to reconcile what a person is entitled to, against what they got.

If the person is not a dependent in 2020, then they would be eligible for consideration as individual filers. That doesn't mean "not being claimed." It means "no longer qualifies as a dependent." You must correctly address whether they Can be Claimed as a dependent on someone else’s tax return.

The third payout which started in Jan 2021, has different eligibility rules as to dependents and this payout is a projection, using 2019 or 2020 tax returns, then reconciled against Actuals on the 2021 tax return.

You might want to bookmark these links and read the IRS guidance.

Interactive wizards portal includes one for determining dependency:

https://www.irs.gov/help/ita

And:

https://www.irs.gov/newsroom/economic-impact-payment-information-center-topic-a-eip-eligibility

https://www.irs.gov/coronavirus/second-eip-faqs#Eligibility

https://www.irs.gov/newsroom/irs-is-issuing-third-round-of-economic-impact-payments

One for each of the three EIP “stimulus” payments.

[Leetpurple]

Thanks so much!