The Third Economic Impact Payment. Did You Get It?
In June 2021, the IRS had issued $390 billion in Third Economic Impact Payments (also known as Stimulus Payments). These payments were put in place to help businesses who had suffered as a result of the Covid-19 pandemic and the employees of these businesses who may have lost their jobs as a result. The payments were made out of a $1.9 trillion recovery plan fund. These businesses are mainly focused in the hospitality area, where hotels, restaurants and bars have been instructed to close, or in the retail or service industries where customers have resorted to using online shopping or automated services.
The third round of these payments to try to support struggling businesses began being issued in March 2021 and continued throughout the year on a first come, first serve basis based on applications.
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How Much is the Stimulus Payment?
The third stimulus payment can be anything up to $1,400 per person and there’s a potential that each individual would have received this payment if they were eligible, but many US citizens and Green Card holders living abroad did not get the payment automatically, even though they’re eligible.
If you are married or have dependents, there’s a possibility that you will receive $1,400 per person within that household depending on your financial situation.
To find out if you’ve been paid, or if you’ve received a partial payment, you can create an IRS online account or use the ‘My Payment’ app. You could also request a Notice 1444-C hardcopy of your payment for proof when completing your tax return.
Many expats struggle with the IRS “My Payment” app as they don’t have sufficient “US” identification to create an account, although the US is trying to make it easier to access with a US passport alone. Most can’t access the system without a US cell phone number. Some people have managed to set up a US cell number using various online services so they can access the system.
By the end of January 2022, the IRS will begin processing letter 6475 for all households that received a stimulus payment to confirm the amount provided and any ‘Plus-Up Payments’ that you received.
What is a Plus-Up Payment?
A plus-up payment is a payment that is deposited to the bank account of a tax filer if their stimulus payment wasn’t given in full due to their previous tax return not showing their current financial situation.
The plus-up payment will make up the amount to the full $1,400 per person that the individual would have been entitled to, should the tax return have displayed the full and current information.
Basically, it’s a “top up”. If you didn’t get the full amount and you should have, you can expect the different to be paid to you.
Why Haven’t You Received Your Third Stimulus Payment?
Some people, depending on their financial situation throughout the year, haven’t automatically qualified for the third stimulus payment because their financial situation has changed midway through the year. While this may have been picked up automatically by the IRS based on late filings from the previous year, it isn’t always. If the IRS do realize that you have received less than you should have prior to you filing a tax return, they may send out the remaining stimulus payment to your bank account in the for of a plus-up payment.
This could happen if, for example, your standard income for tax years 2019 and 2020 exceeded the threshold for payment – meaning that you were deemed financially stable without the stimulus, then you wouldn’t have qualified for the first couple of payments. However, if you lost your job midway through 2021 as a result of the pandemic, then your income would have drastically decreased.
However, because you hadn’t previously qualified, the IRS hasn’t set this up automatically.
In this case, you would need to apply for the stimulus if no plus-up payment has been applied automatically. These circumstances might mean that you miss the stimulus application deadline, or, depending on your financial situation, only receive a partial payment.
How Do the IRS Determine My Eligibility?
For most stimulus payments (unless your financial situation has recently changed), the IRS will have looked at the information they previously had regarding your finances to determine your eligibility. This allowed for faster payments to those in need.
They will consider:
- Any tax returns filed within the previous 2 years.
- The non-filers tool submissions for the first Economic Impact Payment.
- Child Tax Credit non-filer records.
- Benefits recipients.
If your information on any of these payments or previous returns is incorrect, your stimulus payment may not be paid.
What if I’m way behind on my U.S. tax returns?
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What To Do If You Didn’t Receive Your Third Stimulus Payment
If you didn’t apply for your third stimulus payment or you didn’t know you were entitled, or even if you’ve received a partial amount but you need to claim the remaining figure, there’s still a way that you can claim using your next tax return.
From January 2022 you will be able to claim your stimulus payment as a Recovery Rebate Tax Credit on your 2021 tax return. You will need to complete the Recovery Rebate Tax Credit worksheet found on the IRS website and submit this alongside your tax return.
On this worksheet you will need to declare the amount of money you’ve received so far in stimulus payments and declare any payments made to other people within your household.
If you didn’t qualify for the previous stimulus payments and your financial situation has now changed to make you eligible, you will also need to declare your Adjusted Gross Income so that the IRS can determine your eligibility for this most recent payment.
Once you’ve determined the exact amount of recovery rebate that you’re entitled to, you’ll need to add this to line 30 of your tax return.
What’s the Difference Between a Stimulus Payment and a Recovery Rebate?
The stimulus payment was an amount of up to $1,400 that was paid directly to the account of qualified individuals. However, the rebate works slightly differently, in that it won’t get paid to your account. Instead, it will be removed from the amount of taxes you owe or increase the tax refund amount that you receive after you put in your tax return.
Although this may not seem quite as attractive as a one-off payment to your bank account, it still equates to money in your pocket, as it’s removed for the total amount that you owe back to the IRS at the end of the fiscal year.
How Do I Qualify for the Third Stimulus Payment?
All U.S citizens who aren’t dependents will qualify for the stimulus payment if their AGI is below:
- $150,000 – If filing jointly
- $112,000 – If filing as the head of the household
- $75,000 – If filing as an individual
If your income exceeds these thresholds, you could still qualify for a partial payment if your income doesn’t exceed:
- $160,000 – If filing jointly
- $120,000 – If filing as the head of the household
- $80,000 – If filing as an individual
If your income exceeds these amounts, regardless of your situation, you won’t qualify for any stimulus payment.
If you’re up to date with your tax returns and have filed in 2019 and 2020 showing an income lower than the above figures and have previously qualified for the stimulus payments, then the third payment should be applied automatically. This payment would be based on your previous year’s financial situation in the assumption that this hasn’t changed.
If you previously only received half of the full stimulus payment ($700 per person), then the assumption would be that you would qualify for the same amount for the third payment. If your financial situation has changed since this time to lower your income further, then you may need to apply separately to receive the full amount or claim on a recovery rebate.
How to Qualify for the Third Stimulus Payment if You Don’t File a Tax Return
If you don’t normally file a US tax return (for example, if you’re a American married couple who jointly earn an income less than $24,800 or single person who earns less than $12,400) and you’ve missed the cut off to apply for a stimulus payment you can still qualify by entering your Social Security Number or Individual Tax Identification Number (ITIN) onto the non-filer tool on the IRS website.
The tool will require information about your income, your full address, contact details and bank account information. It can take 2-3 weeks for the for the IRS to process the information and send out a rebate confirmation once submitted.
Remember, just because you don’t have to file a US tax return, it doesn’t mean you can’t. You can always file a US tax return and claim your missing stimulus payments.
Is the Third Stimulus Payment the Same as the Previous Two?
Although all 3 stimulus payments have been paid out for the same reason – to support people who have been financially affected by the pandemic – they do differ slightly. The third stimulus payment was actually expanded in some respects to benefit more people.
For example, in the initial two payouts, a ‘dependent’ was listed as a child under the age of 17. All filers and their dependents would be entitled to the same $1,400. However, in the third stimulus payment, any type of dependent was eligible for the same $1,400 payment. This included elderly relatives, students, or disabled individuals.
The third stimulus payment was also more per person than the previous two. The relief packages throughout the earlier stages of the pandemic only offer $600 per person. This has more than doubled to the $1,400 per person in the third leg of the scheme as more people have shown the effects of the pandemic on the economy.
What to Do Next?
If you haven’t received a stimulus payment and you feel that you may have been eligible, you may now be entitled to a recovery rebate credit. To claim this, you’ll need to file a tax return to show your full household income for the previous year, filling in line 30 with your believed rebate amount. This will be processed within 3-5 weeks for a tax rebate.
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