Due to the coronavirus pandemic and related economic crisis, the U.S. government passed several forms of federal aid to assist Americans. In March 2020, Congress passed the $2.2 trillion CARES Act which included Economic Impact Payments (EIP 1), commonly referred to as stimulus checks. The EIP 1 provided American households up to $1,200 per adult ($2,400 for joint filers) and $500 for each qualifying child, up to a cap of $1,500 for three children. The EIP 1 payments were reduced or phased out for income above $75,000 for single filers, or $150,000 for joint filers.[i]

A second round of stimulus payments (EIP 2) totaling $900 billion, was passed under the Consolidated Appropriations Act in late December 2020. EIP 2 provided payments of $600 per adult individuals ($1,200 for joint filers) and $600 for each qualifying child. The phase-out of EIP 2 payments also phased out for individuals earning higher than $75,000 or joint filers at $150,000.[ii]

The first two stimulus payments were based on your 2019 filed tax return. However, many realized the brunt of financial hardship in 2020. Therefore, those who were eligible based on their 2020 income but didn’t receive a stimulus check may claim the stimulus as a Recovery Rebate Credit, built directly into the IRS tax Form 1040 when filing your 2020 tax return.

The American Rescue Plan presented by President Joe Biden aims to pass $1.9 trillion in COVID aid, including a third stimulus check (EIP 3) of up to $1,400 per person. However, the income level of eligible participants is expected to be much narrower to ensure only the hardest hit families receive stimulus payments.

Eligible persons must be a U.S. citizen or U.S. resident alien, have a social security number, and must not be claimed as a dependent on someone else’s tax return. Even if you did not file a 2019 tax return, you may claim the stimulus payments via the Recovery Rebate Credit when filing a 2020 tax return. 

Key information about Economic Impact Payments and the 2020 Recovery Rebate Credit is available at IRS.gov/eip. You may also check the status of your payment at IRS.gov/getmypayment. For additional information on tax filing assistance, you may also reach out to a Certified Public Accountant.

For more information on timely financial topics, please sign-up for our upcoming May webinar at www.kondowealthadvisors.comor email info@kondowealthadvisors.com.

The opinions expressed above are solely those of Kondo Wealth Advisors, Inc., (626-449-7783 info@kondowealthadvisors.com) a Registered Investment Advisor in the state of California. Neither Kondo Wealth Advisors, Inc. nor its representatives provide legal, tax or accounting advice.

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

[ii]https://www.irs.gov/newsroom/treasury-and-irs-begin-delivering-second-round-of-economic-impact-payments-to-millions-of-americans#:~:text=Authorized%20by%20the%20newly%20enacted,for%20each%20qualifying%20child.