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    New Stimulus Payments

    The House of Representatives and the Senate both passed the Consolidated Appropriations Act of 2021 on December 21, 2020, and the President is expected to sign it into law.  While the main purpose of the Act is funding the federal government through the end of the government’s current fiscal year, it includes many tax-related provisions. 

    The Act authorizes a second round of stimulus payments (economic impact payments) for the 2020 tax year to be sent to eligible taxpayers as soon as possible.  Such payments could begin as early as the last week of December 2020.

    The second round of payments will be $600 for individuals.  For married couples, the payment is $600 per spouse for a total of $1,200.  In addition, for every child under the age of 17 qualifying for the child credit, the payment is increased by $600. 

    The same phaseout rules apply as in the first round of payments.  The phaseout begins at $75,000 of adjusted gross income for single individuals, $112,500 for heads of household and $150,000 for married couples filing joint returns.  The phaseout is computed as 5% of the amount by which a taxpayer’s income exceeds the threshold.

    The IRS will use information from the 2019 income tax returns of taxpayers to determine eligibility for the payments. 

    Since this second round of payments will also be treated as an advance payment of a credit on the 2020 income tax return, the IRS will need to revise the worksheet in the instructions for Form 1040 to reflect the new payments. 

    The payments will be made by direct deposit if the taxpayer provided bank account information on the 2019 income tax return that was used for either a deposit of a refund or a payment of tax due via a debit of the bank account.

    The original round of stimulus payments is discussed on pages 1 to 6 of the Tax Year 2020 M+O=CPE Individual Tax Year-End Workshop Reference Book.

    The information provided herein is provided with the understanding that the author and publisher are not engaged in rendering legal, accounting or other professional service. As such, M + O = CPE, Inc. and the author disclaim any responsibility or liability for the information supplied herein or the application of said information.