New Stimulus Package
The second stimulus payment was signed into law at the end of December 2020, and came as welcome news to US citizens the world over.
Eligible taxpayers are set to receive $600 in the second round of stimulus payments, and it is structured much in the same way as the first payment. Eligibility for the automatic prepayment is being based on the 2019 tax return.
Let us explore some of the similarities and differences between the two payments, as well as the changes that were made on this second relief bill.
What has changed from the first payment?
- The first change, and one that has had ramifications for many Expats, is the fact that NR spouses do not disqualify the rest of the family from receiving the payment. Meaning that a taxpayer who files a joint return with an ITIN holding spouse will now receive the payment for himself and qualifying dependents. Obviously, the NR spouse themselves will not receive it.
Additionally, now that this clause was added, the first payment can be claimed when filing the 2020 tax return.
- Since the payment begins to phase out above the same income level as the first payment, more clients are likely to not receive anything. Due to the payment being lower, it will phase out quicker.
- The IRS have not provided an option to update bank information online in order to receive the payment via direct deposit. The payment will therefore be sent as a paper check to all taxpayers whose direct deposit information was not included on the 2019 tax return.
- Those who used the online ‘non-filer’ tool to claim the first payment and received it should get the second payment automatically. The IRS have not made this tool available for claiming the second payment.
What has remained the same?
- Dependents between the ages of 17 and 24 remain in limbo as with the first payment. They do not qualify to receive the payment as dependents, however they still hold the legal status of dependents.
- The IRS will be sending out a letter with the second payments. This letter is Notice 1444-B. It is important to keep a copy of this letter for future reference, especially if the payment does not arrive.
- This prepayment is not considered a credit and as such will not be used to offset a present balance due with the IRS. The IRS may decide to change the classification of the payments next year, however at this point they have not published additional information on the matter.
The IRS have imposed a cutoff date for sending out the payment. This date is January 15, 2021. They have already issued many payments, however are not likely to finish sending out all payments by that date. Someone who is eligible for the payment but does not receive it will be able to claim it as ‘Recovery Rebate Credit’, RRC, on the 2020 tax return. Anyone who received part of the payment but was eligible for more will also be able to claim the difference when filing for tax year 2020.