Latest Government COVID Response – American Rescue Plan

​Yet another COVID measure is being signed into law on Friday, March 12. See below for specifics expected to be included…

Recover Rebate

• This third stimulus round provides $1,400 per taxpayer, including dependents.
• Credit begins to phaseout once income hits $75,000 for individuals and $150,000 for married couples and completely phases out at $80,000 and $160,000…respectively.
• Payments are based off the latest filed tax return (see section below regarding deciding on when to file).

 
Unemployment Taxation

• The first $10,200 of unemployment will be tax-free with the IRS (first $20,400 for married couples).
• Applies only to 2020 unemployment as of now (TBD for future years…very likely for 2021 as well).
• Extends unemployment benefits through September and increases amounts by $300/week
• We’re waiting for further guidance on how this affects tax returns already filed as far as whether amendments will be needed, or if the IRS will have other methods for those returns.

 
Child Tax Credit

• Increases credit from $2,000 to $3,000
• Children under 6 years old will be eligible for $3,600
• Expands credit to age 17 versus current limit of 16 years old
• Potentially advanceable into monthly payments (taxpayer will likely have election capability with new IRS portal, which will also allow updates for new children, etc.)
• There is said to be income limitations changes coming as well

 
Also, being added in are expansions to the following, but specifics aren’t know yet:

• Earned Income Tax Credit
• Child & Dependent Care Credit
• Premium Tax Credit

 
When to File (delay or not)
With the added stimulus, many want to know if they should hold off filing. The only reasons to delay filing would be if you earned beyond the above thresholds in 2020, which would make it more beneficial to hold off on filing so the stimulus is based on 2019 income, or if a dependent on your 2019 tax return became independent in 2020.
 
Otherwise, it behooves you to accelerate your 2020 filing if you earned too much income in 2019 to qualify, or have new dependents in 2020 for whom you want to get the funds.
 
Questions
While we know you have questions and we’re happy to answer them, please know that the details aren’t ironed out yet as far as implementation and specifics. We’ll be sure to provided added details as applicable. We just wanted to get you information right away to clarify some of the measures!