How Much of the 2021 Recovery Rebates Will You Receive and When Will You Receive Them?

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The latest stimulus payment is called the 2021 Recovery Rebates to Individuals, written into Part 1 of H.R. 1319 - American Rescue Plan Act of 2021. The American Rescue Plan was signed into law yesterday, March 11, 2021.

Recovery “Rebate” is a bit of a misnomer, as a rebate usually refers to refunding something that was previously paid. That is obviously not the case here. But hey, we can get past that.

How much is it?

The Recovery Rebates are up to $1,400 per person, including the primary taxpayers and their dependents. So a family of four can receive up to $5,600. A single taxpayer can receive up to $1,400. The Brady Bunch could receive as much as $11,200 (or even $12,600 if Alice was claimed as a dependent by Mike and Carol Brady). That’s some serious cash! Or a single parent with one kid could receive as much as $2,800.

This $1,400 per person is for ANY dependent properly claimed by the taxpayer, unlike the previously two credits, which limited the dependents to kids under age 17. That’s a huge change for some taxpayers.

What are the income caps?

  • Single and Married Filed Separate: You get the full rebate if your “Adjusted Gross Income” (AGI) was under $75,000 and it phases out at $80,000.

  • Head of Household: Full rebate if your AGI was under $112,500, completely phasing out at $120,000.

  • Married Filing Joint: Full rebate under $150,000; completely phasing out at $160,000.

Those are some very narrow phaseout ranges!

Based on what?

  • If your most recently filed tax return is for 2019, your AGI will be based on that.

  • If you have already filed your 2020 return and the IRS has processed it, your AGI will be based on this return.

  • What if you’ve filed 2020 already but your 2019 AGI is lower than your 2020 AGI? While I’m not clear on it from my read of the law, I would assume they use the lesser of the two.

What if I haven’t filed 2020 yet?

  • If you haven’t filed 2020 yet and did not receive the full payment based on your 2019 return, you have another chance to receive a payment if you get your return filed the earlier of 90 days after the 2020 filing deadline (April 15th plus 90 days = July 15th) or September 1st.

  • Huh? That’s strange. Why isn’t it just July 15th? I guess because if the IRS decides to extend the due date of the returns, then September 1st will be the absolute final day to get another payment in 2020. Short of that, plan on July 15th.

  • Long story short: GET YOUR 2020 TAX RETURNS FILED ASAP if your 2019 AGI precludes you from getting a 2021 Recovery Rebate.

THE IRS HAS A PAYMENT LOOKUP TOOL TO SEE IF YOU’RE GETTING PAID AND WHEN THEY PLAN TO PAY IT AT sa.www4.irs.gov/irfof-wmsp/login

What if I don’t get the rebate based on my 2019 or 2020 returns?

  • You’ve got one more chance! When you file your 2021 tax return in 2022!

  • If you fall into this category and are on the cusp of receiving a payment but your income is too high, perhaps some tax planning is in order:

    • Perhaps you are a single mom with one kid and you make $80,000 in 2021.

    • You earned too much in 2019 and 2020 to receive the $2,800 credit.

    • Get that $80,000 down to $75,000 by contributing $5,000 to your work 401(k) or to an Individual Retirement Account (IRA) and, wallah, you get a $2,800 refundable credit on your 2021 tax return. That’s an immediate 56% tax-free return on your $5,000 investment.

  • Another example:

    • You are a family of 5 - Mom, Pop, Little Joey, Big Sis Allie and Granny Mabel, who is claimed as a dependent. That’s, ka-ching, That’s $7,000 in Recovery Cash (hey, I like the sound of that better than Recovery Rebate!).

    • Mom and Pop made had AGI of over $160,000 in 2019 and 2020 and thus did not receive any of this rebate.

    • They know in late summer they will have and AGI of $160,000. So, once again, consider putting $10,000 into a 401(k) or IRA (traditional, not Roth) to get that AGI down to $150,000. Invest $10,000 and receive $7,000 in rebates. Hard to beat that investment!

Other Questions

  • Are these payments taxable? No.

  • What if I don’t file 2019/2020 tax returns? If you received a previous stimulus payment without filing taxes, you’ll probably receive one again (assuming you are still eligible). Perhaps the IRS may have a 2021 Recovery Rebate tool to input your banking info again at www.irs.gov/coronavirus/non-filers-enter-payment-info-here.

  • I really don’t need this extra money. What can I do with it? Donate it to Conejo Valley Guide, and we will put it to work in the local economy by purchasing gift cards and giving them away in drawings on our Facebook page at www.facebook.com/ConejoValleyGuide. Donations via credit card at bit.ly/CVGFund, paypal.me/ConejoValleyGuide or Venmo (@CVGuide).

Pressing tax questions? Call us at 818-876-8380. Goldstein Weiss, CPAs is located in Calabasas.

Pressing tax questions? Call us at 818-876-8380. Goldstein Weiss, CPAs is located in Calabasas.