American Rescue Plan: What does the third stimulus mean for your clients?

A third round of stimulus checks is on the way for millions.

The American Rescue Plan Act of 2021, a new COVID-19 relief bill, was signed into law on March 11, 2021. The bill includes a third round of stimulus payments for millions of Americans. We know these funds are important to your clients, and we are here to help.

If your clients are eligible, they could get up to $1,400 in stimulus checks for each taxpayer in their family, plus an additional $1,400 per dependent. This means a family with two children could receive $5,600.

The IRS began issuing the first batch of stimulus payments, and they could have arrived as early as this last weekend (March 13-14), with more arriving over the coming week. Further batches of payments will arrive during the following weeks. If your clients are eligible, have them check the status of their stimulus payment and the way it’ll be sent to them by going to the IRS Get My Payment Tool, which will be live on March 15.

Who would be eligible for the third stimulus check?

Families earning less than $150,000 a year and individuals earning less than $75,000 a year should get the full $1,400 per person. Families earning up to $160,000 per year and individuals earning up to $80,000 per year will receive prorated stimulus checks for less than $1,400 max.

Unlike the previous two rounds, your clients will receive stimulus payments for all their dependents, including adult dependents and college students.

How much is the third stimulus check?

If your clients are eligible, they could get up to $1,400 in stimulus payments for each taxpayer in their family plus an additional $1,400 per dependent. That means that a family of four with two children could receive up to $5,600.

Remember, just because your clients are eligible, does not mean they are eligible for the full $1,400.

How will my clients get their third stimulus check?

Your clients don’t need to do anything to get their stimulus check. The IRS will determine eligibility based on their last tax return, either 2019 or 2020, and will likely send their payment to the bank account where their tax refund was deposited.

When will my clients get their third stimulus check?

The IRS has begun distributing stimulus payments. The first batch of stimulus payments could have arrived as early as last weekend (March 13-14), with more arriving over the coming week. Further batches of payments will arrive during the following weeks.

For information on when your clients can expect your stimulus payment, have them check the IRS Get My Payment tool, which will be live starting March 15.

Can my clients change or update their bank information?

Right now, there is no way for your clients to change their information for their stimulus check. The payment will be based on the information from their latest tax return, and will go to the bank account or address the IRS has on file for them.

Will the stimulus affect my clients’ taxes for this year, or next year?

None of the three stimulus checks (or Recovery Rebate Credits) are considered income, and therefore aren’t taxable. They won’t reduce your client’s refund, or increase what they owe when they file their taxes this year or next year. They also won’t affect your clients eligibility for any federal government assistance or benefits.

Here is other information you need to know for your clients:

Expanded unemployment and retroactive tax relief. Unemployment payments will increase by $300 per week and the benefits will be extended through Sept. 6, 2021.

The bill extends the Pandemic Unemployment Assistance (PUA), which expands unemployment to those who are not usually eligible for regular unemployment insurance benefits. This means that self-employed, freelancers, and side giggers will continue to be eligible for unemployment benefits.

The bill also makes the first $10,200 of unemployment income tax-free for households with income less than $150,000. This provision would be retroactive to tax year 2020 (the taxes you file in 2021).

Expansion of credits for children of workers. The American Rescue Plan also includes an expansion of tax credits for lower-income workers with kids. 

Enhanced Earned Income Tax Credit. Beginning next year, the Federal Earned Income Tax Credit has been expanded for workers without kids and nearly triples the maximum credit. Eligibility is also extended for a wider range of filers, now allowing taxpayers to qualify who are over 65 or between the ages of 19-25.

Expanded Child Tax Credit. Beginning in tax year 2021, the Child Tax Credit will be expanded. The bill increases the amount that families claiming the Child Tax Credit receive from $2,000 to:

• $3,600 for each child under 6.
• $3,000 for each child age 6-17.

The credit is now fully refundable – that means that your clients are eligible for the credit even if you they don’t owe taxes.

Although this credit is for next year’s tax filings, payments will also be sent in advance, over the course of the year, beginning no earlier than July 2021 so people don’t have to wait to file their 2021 taxes. The IRS will likely determine eligibility based on your clients’ most recent tax filing.

Here is a date-by-date history of activity for the American Rescue Plan:

March 12: The IRS began distributing stimulus payments, and we expect eligible people could receive their stimulus payments as early as next week (March 17). We anticipate that the IRS Get My Payment tool will be updated next week.

March 11: The American Rescue Plan was signed into law on March 11. The plan includes a third round of stimulus payments for millions of people. In addition, the bill also extends certain unemployment benefits and expands tax relief for unemployment benefits, the Child Tax Credit, and the federal Earned Income Tax Credit (EITC).

March 10: The American Rescue Plan passed the House today. The legislation still includes a $1,400 stimulus check for eligible Americans, expanded unemployment, and tax relief on unemployment benefits for households making under $150,000. The legislation will now go back to the President to be signed into law and we anticipate this will happen on Friday.

March 6: The American Rescue Plan passed the Senate today. As it stands today, the legislation agreement includes a $1,400 stimulus check for eligible Americans, expanded unemployment, and tax relief on unemployment benefits for households making under $150,000. The amended legislation will now go back to the House for passage before being sent to the President to be signed into law.

Feb. 27: The COVID-19 Relief legislation, known as the American Rescue Plan, passed the House of Representatives and has been sent to the Senate for discussion and voting. As it stands today, the legislation includes a $1,400 stimulus check for eligible Americans and further tax relief through an expanded Child Tax Credit and Earned Income Tax Credit.

Feb. 16:  In January, President Biden proposed a $1.9 Trillion emergency coronavirus relief plan, called the American Rescue Plan. As it stands today, the plan includes a third direct stimulus payment, expanded unemployment, and the expansion of tax credits for families with kids.

President Biden has said that the American Rescue Plan is a priority for him, and things are evolving quickly. We know how important these funds are to you, but no new law has been passed, yet, authorizing these payments.

The bill is currently working through Congress, where changes could be made prior to a vote. If the House of Representatives passes the plan, it will then go to the Senate for discussion and voting and then to the President for signature.

We are monitoring this closely, and will continue to update this post with the latest news and information to share with your clients. Access this article frequently to see any updates and be sure to visit the Intuit® Tax Pro Center for articles related to the CARES Act.

Editor’s note: This article was originally published on March 4, and was updated with new information on March 12 and March 16.