here is how the law worked for the 1st two stimulus payments:
those payments were what was called 'an advance' against 2020 payments.
So since the IRS didn't know your 2020 status (dependents, income) DURING 2020, the law required the IRS to ESTIMATE what you were due based on your 2019 tax return information and if that wasn't available they were to use 2018 data,.
But the ACTUAL amount you were due was based on the information in your 2020 tax return - income, dependents, etc.
if the ACTUAL was higher than the ESTIMATE (example children born in 2020 who were not listed on the 2019 / 2018 tax return), you get the difference on Line 30 of Form 1040
if the ESTIMATE was higher than the ACTUAL, you are not required to return the money to the IRS, so Line 30 will be zero. In other words, Line 30 can never be negative.
For the 3rd stimulus payment it will work the same way, but with a one year delay. The stimulus is based on your 2020 tax return (and if not received, your 2019 tax return). That is the ESTIMATE.
Next year when you submit your 2021 tax return that will be the ACTUAL.
if the ESTIMATE was higher than the ACTUAL, you are not required to return the money to the IRS, so Line 30 will be zero. In other words, Line 30 can never be negative.
yes, some people 'won' under this formula. For example, I didn't make much money in 2019 so I got the two stimulus payments but when I completed by 2020 tax return, I actually made a LOT of money so was not eligible for the money (ESTIMATE more than ACTUAL) I am not required to return the money because the law was written that way.
make sense?
