Tax News American Rescue Plan: What Does it Mean for You and a Third Stimulus Check Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by TurboTaxLisa Published Mar 18, 2021 - [Updated Aug 31, 2022] 8 min read August 24, 2022 Update: President Biden, Vice President Harris, and the U.S. Department of Education announced a three part student loan debt relief plan that includes an extension of the pause on student loan payments until December 31, 2022, debt cancellation, and a proposal to create an income-driven repayment plan to help lower future monthly payments. Find out more details about what this can mean for you here and below. April 6, 2022 Update: The Biden Administration extends student loan repayment, interest, and collections through August 31, 2022. December 22, 2021: The Biden Administration extended the pause of federal student loan payments, interest, and collections through May 1, 2022. March 12: The IRS has begun distributing stimulus payments and we expect eligible people could receive their stimulus payments as early as next week (March 17th). We anticipate that the IRS Get My Payment tool will be updated next week. For information on when you can expect your stimulus payment, visit the “Where’s My Third Stimulus Check?” blog post. March 11: The American Rescue Plan was signed into law on March 11, 2021. 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). Here is what you need to know: Third Stimulus Payments for Individuals and Joint Taxpayers Those eligible will get up to $1,400 in stimulus payments for each taxpayer in their family plus an additional $1,400 per dependent. This means a family with two children could receive $5,600. Unlike the previous two rounds, you will receive stimulus payments for all your dependents, including adult dependents and college students. Although you may want to file your 2020 return now in order to provide your most recent information to the IRS, including bank account information, you don’t need to do anything to get your stimulus check. The IRS will determine eligibility based on your last tax return, either 2019 or 2020, and will likely send your payment to the bank account where your tax refund was deposited. For your 2021 tax return, the IRS will send a Letter 6475 with your total amount of 2021 stimulus payment. This letter only applies to the third stimulus payment received in 2021. This letter has all the info you need to report the correct amount of the third stimulus you received and understand if you are eligible for additional stimulus dollars and how much. If you didn’t get the full stimulus amount you were eligible for then you may be able to claim those dollars through the Recovery Rebate Credit on your tax return. So, how do you know if you may be eligible to receive a third stimulus payment? If you have an adjusted gross income (AGI) of up to $75,000 ($150,000 married filing jointly), you should be eligible for the full $1400 stimulus payment. *Note, adjusted gross income (AGI) is your gross income like wages, salaries, or interest minus adjustments for eligible deductions like student loan interest or your IRA deduction. Your AGI can be found on line 8b of your 2019 Form 1040 or on line 11 of your 2020 Form 1040. As your AGI increases over $75,000 ($150,000 married filing jointly), the stimulus amount will go down. The stimulus check rebate will completely phase out at $80,000 for single filers with no qualifying dependents and $160,000 for those married filing jointly with no dependents. Once again, mixed-status households (households with different immigration and citizenship statuses) will be eligible for stimulus payments. Expanded Unemployment and Retroactive Tax Relief Unemployment payments will increase by $300 per week and the benefits will be extended through September 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 taxes you file in 2022) 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 you are eligible for the credit even if you 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 most recent tax filing. For your 2021 tax return, the IRS will send a Letter 6419, 2021 advance Child Tax Credit (CTC). This letter will have the total amount of advance Child Tax Credit payments you received from July 2021 to December 2021 and you will need that number when you file your taxes. The IRS will use this number to make sure you got the right amount of your advance Child Tax Credit payments. Tax Relief for College Students The American Rescue Plan provides relief to students with government and federal student loans by allowing students with forgiven loan debt to exclude the discharged debt from their taxable income for tax years 2021 through 2025. This provision does not apply to loans made by private lenders. The Biden Administration has also extended the suspension of federal student loan payments, interest, and collections through December 31, 2022. The pause includes the following relief for eligible student loans: Suspension of loan payments 0% interest rate Stopped collections on defaulted loans Note: You do not have to pay a fee to get 0% interest or suspended payments for federal student loans. Tax Relief for Self-Employed The American Rescue Plan extends refundable tax credits for sick leave and family leave through tax year 2021 for both eligible self-employed and small business owners. The provision also allows you to use prior year net earnings from self-employment in the calculation of the average daily self-employment income if the prior year’s net earnings help you arrive at a higher average daily self-employment income. If you or a family member were impacted by coronavirus and you could not conduct your business, find out if you are eligible for the qualified sick and family leave credits using the Intuit Tax Credit Estimator. Temporary Waiver to Pay Back Advance Premium Tax Credits Due to the challenges Americans faced with fluctuating income in 2020, the American Rescue Plan temporarily waives the requirement for taxpayers to pay back excess advanced premium tax credits on their 2020 taxes since taxpayers may have received more income than projected when applying for a subsidy to help pay for Marketplace insurance. The American Rescue Plan will also provide Cobra subsidies from April 2021 through September 30, 2021, for those who are laid off or experience reduced hours in 2021. 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. February 27: The COVID 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 $1400 stimulus check for eligible Americans and further tax relief through an expanded Child Tax Credit and Earned Income Tax Credit. February 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. Previous Post What Coronavirus Relief Means for College Students and Grads Next Post Where’s My Third Stimulus Check? Written by Lisa Greene-Lewis Lisa has over 20 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. She has held positions as a public auditor, controller, and operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show, and major news broadcast to break down tax laws and help taxpayers understand what tax laws mean to them. For Lisa, getting timely and accurate information out to taxpayers to help them keep more of their money is paramount. More from Lisa Greene-Lewis Follow Lisa Greene-Lewis on Twitter. 39 responses to “American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” I filed a joint 2020 tax return today, Oct 12, 2021. My income in 2019 was 173k while my 2020 income is 85k. I have not received 3rd stimulus pmt because I assume IRS based it on my 2019 income, which was over the limit. Will they now look at my 2020 85k return and send me the 3rd stimulus payment? Reply Hi Hal, The IRS based your eligibility for the third stimulus payment based on the most recent tax return they had processed on file for you. If you were eligible for the third stimulus payment, and did not receive that payment, when you file your 2021 tax return you will be able to reconcile any third stimulus payment that you were eligible for in the form of a Recovery Rebate Credit on your 2021 tax return. Hope this helps. Best, Katharina Reekmans Reply Oh please. Do you really need that money? Reply We filed our federal and state returns via US Mail as I was unable to efile. Our returns were mailed before the most recent COVID Relief bill made the first $10,200 of unemployment income tax-free for households with income less than $150,000. This action was made retroactive to tax year 2020. My spouse had just over $7000 in unemployment benefits. These benefits are now tax free. When will we know if we have to file an amended return? If we do not have to file an amended return, will the IRS let us know the new amount that we owe since the $7000 in unemployment compensation are now tax free? Thoughts and guidance would be much appreciated. Reply Hi Chuck, If you’ve already filed your return, you should not do anything. The IRS will refigure your taxes and send any refund amount directly to you. Please check the article here on new unemployment income relief for most up to date information. Hope this helps. Best, Katharina Reekmans Reply Have you guys figured out yet when we will have our taxes adjusted if we’ve already filed our return for the unemployment relief before it was passed? Reply If you filed your taxes before the retroactive tax relief can you amend your taxes return? Reply Hi Cherrelle, If you’ve already filed your return, you should not do anything. The IRS will refigure your taxes and send any refund amount directly to you. We will update with more details as they become available. Please check this article for details about new unemployment income relief. Hope this helps. Best, Katharina Reekmans Reply I’m confused. Is the child tax credit applying for this year? I read starts 2021 but a turbo personnel told me yesterday to hold my taxes for the child tax credit coming through this year. Reply Hi, When will TurboTax be updated to show the relief on unemployment? I haven’t filed yet because I am confused whether I will still owe money back in taxes. Reply Hi Jade, We’re working around-the-clock to make updates to TurboTax based on the recently-enacted American Rescue Plan so our customers can file with confidence and get their maximum refund. We are implementing IRS guidance on unemployment income within TurboTax and expect updates to be available in product by Thursday evening, 3/18. Hope this helps. Best, Katharina Reekmans Reply Thank you very much, that’s helpful! I filed my taxes with you early for processing on February 12th 2021 . When will I get my refund ? Reply Hi Elisa, We know how important tax refunds are to customers, you can check the status of your refund by using the IRS Where’s My Refund tool. Hope this helps. Best, Katharina Reekmans Reply Are we eligible if we file jointly and have over 160 K combined income but also have an adult dependent? Reply Hi Jon, Married couples who earned between $150,000 and $160,000 may be eligible to receive a reduced payment. Married filing joint couples with higher incomes than this range are not eligible for a payment. Hope this helps. Sincerely, Katharina Reekmans Reply My tax return has been accepted but not yet processed, will I still get my stimulus check or does my return need to be processed before I can get my stimulus. Reply Angelena, Eligibility is based on the most recent tax information the IRS has on file for you. If you’ve already filed your 2020 taxes and the IRS has not finished processing your 2020 tax return, your eligibility will likely be based on the information in on your 2019 tax return. Hope this helps. Sincerely, Katharina Reekmans Reply Where do I find the answers to asked questions Reply Hi Dee, For frequently asked questions regarding the third stimulus, you can see our FAQs here. Hope this helps. Best, Katharina Reekmans Reply If I claimed my 18 yr old on my taxes will he be eligible for a stimulus check Reply Hi Janice, As part of the third stimulus relief package, stimulus checks of up to $1,400 will be sent to eligible individuals plus an additional $1,400 for each dependent. Unlike the previous two rounds of stimulus payments, you may receive additional stimulus payments for all your dependents, including adult dependents and college students. Hope this helps. Best, Katharina Reekmans Reply Hi I already filed my taxes on Feb 12, 2021 and I realized that I left a 0 out in my checking account info. How can I correct this! Please help! Reply Hi Brooke, I’m sorry about your information provided to the IRS. Unfortunately the IRS doesn’t have a way to change your information once you filed. If your financial institution rejects and returns your the deposit, the IRS will issue you a check. Beest, Lisa Greene-Lewis Reply I read an article where if your taxes for 2020 were under the Max to get the stimulus as opposed to your taxes being over in 2019, you can request to get all 3 stimulus checks. How does one accomplish this with TurboTax? Thank you Reply Hi Karen, If your income in 2020 is less than your income in 2019 and you received a partial stimulus payment or did not receive one at all and you are eligible, you can claim the recovery rebate credit for the first and second stimulus when you file your 2020 taxes. TurboTax has proactive guidance to help you claim the recovery rebate credit if you didn’t receive the first or second stimulus or received a partial payment. Regarding the third stimulus payment under the American Rescue Plan, the IRS will issue the third stimulus payment based on information in your latest accepted and processed tax return(2019 or 2020). If you haven’t filed your 2020 return yet, you can do that now to give your most recent information to the IRS, including bank account or address information to help ensure your third stimulus check goes to the right place. Best, Lisa Greene-Lewis Reply How will us Turbo Tax users know when Turbo Tax is updated for the Americans Rescue Act law Reply When can we expect the UI partial tax exemption to show in the turbo tax system? Reply Hi Seth, If you’ve already filed your 2020 return, hang tight. The IRS will provide guidance on how you can claim these additional benefits soon. Once the IRS issues guidance on the new unemployment tax relief, we will update TurboTax with the latest tax changes as soon as possible so that you can claim these additional benefits if eligible. Please check back with the blog for updates. Best, Lisa Greene-Lewis Reply Will TurboTax automatically recalculate based on the new law? Is there anything users need to do to see the effects of the new law on their taxes? Reply When will Turbo tax have the updated unemployment tax relief included in its program? I haven’t filed bc part of my unemployment will now be tax exempt. Reply Hi Leslie, We’re working hard to keep TurboTax up to date with the latest tax changes based on instructions we receive from the IRS. Check back soon to add your unemployment income and file your return. Best, Katharina Reekmans, EA Reply I haven’t received not one stimulus. How do I get it Reply I electronically filed my 2020 return claiming 16000 in unemployment benefits . When can I file an amended return to reduce my taxes? Reply Saverio, If you’ve already filed your 2020 return, hang tight. The IRS will provide guidance on how you can claim these additional benefits soon. Hope this helps, Katharina Reekmans, EA Reply If I already filed my 2020 taxes return but if it still says that it is processing on the IRS website “Where’s My Refund?” – Will the IRS go by my 2020 “still processing” tax return or my 2019 already processed tax return? Reply Now that the bill was signed , any ETA when TurboTax will update for those that get the tax break for 2020 unemployment income taxes? Reply Can we expect our 3rd round stimulus to be direct deposited on time, unlike last time (y’all sent me a paper check for some odd reason). Reply Jay, We know stimulus checks are very important to you. We are working closely with the IRS to make sure eligible taxpayers get their stimulus checks, and we’ve confirmed that the IRS has accurate bank account information for all TurboTax customers. Sincerely, Katharina Reekmans, EA Reply Leave a Reply Cancel reply Browse Related Articles Breaking News Student Loan Debt Relief Announced: Here’s What it … Education Can I Get a Student Loan Tax Deduction? Self-Employed Student Loan Options When You’re Self-Employed Education Podcast: Tax Tips to Help You With Student Debt Tax News What Coronavirus Relief Means for College Students and … Tax Tips What Debts to Pay Off First? 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