2021 Covid Stimulus Check - 2019 vs 2020 AGI

[Telecorder]

Can Anyone address ramifications of round 3 stimulus check where 2019 AGI is within max limits for family but AGI for 2020 filing won't? We qualified for/received both full initial rounds based on 2018/2019 filed AGI of married filing jointly with two children. Haven't filed our 2020 taxes, as yet, but our 2020 AGI increased to $159,000 which, apparently, is in the new lowered phase out range.

Assuming IRS deposits the full round 3 amounts of $5,600 based on our 2019 AGI before we file for 2020, what ramifications would there be of accepting the round 3 stimulus based on 2019 AGI and then filing 2020 with an AGI within the phase out interval?

[MinhT1 · Accepted solution]

If you have not yet filed your 2020 tax return, the IRS will use your 2019 AGI to determine your eligibility for the third stimulus. 

Once paid, the stimulus payments do not need to be repaid.

[RRR2094]

We are retired seniors (MFJ) without dependents who received the first two stimulus payments in their entirety and $600 in December based on 2018/2019 AGI.  Our AGI in 2019 is $108K and if based on that return we would receive $2800.  Unfortunately we filed our 2020 return early before decisions were made regarding caps for eligibility.  We pulled out money from our IRA in 2020 to pay off our mortgage and the associated tax payments for that withdrawal. As a result our AGI was $163K in 2020 on our early return, exceeding the cap for eligibility.  Had we waited until the filing deadline we would have received the $2800 and now we will receive nothing.  Is that correct?  It seems terribly unfair to be penalized for our compliance.  Is there anything that we can do?

[ErnieS0]

The third stimulus payment is based on 2020. If you filed a complete and accurate 2020 income tax return, then there is nothing you can do to change your stimulus amount. There’s really no way to “take back” your 2020 return.

The third stimulus will be reconciled with the filing of the 2021 return.

You are correct that some ineligible taxpayers will receive a third payment they are not entitled to because they have not filed their return. The same thing happened last year as the IRS used prior year information to send out the payments.

[Telecorder]

I was the one that posted the original question on how the increase in 2020 AGI over 2019 would affect the third stimulus payment. I held off on filing our 2020 taxes since it is reflecting an AGI of $169,000 which would be over the phase out limit. Based on our 2019 filed AGI of $109K, we received the full $5,600 third stimulus [MFJ + 2 minor adopted children] last week.

I'm getting ready to file our 2020 taxes. You commented above that "The third stimulus will be reconciled with the filing of the 2021 return." Just how will this be 'reconciled' ? Can I anticipate our pending 2020 filing being adjusted via our anticipated 2020 refund being reduced/negated by the third stimulus amount received?

[NCperson]

Line 30 can never be less than zero, meaning you will not be asked to return stimulus if it turns out the stimulus paid to you exceeds what your 2021 tax return says you are entitled to.   That is the way the law way passed 

it will be reconciled in 2021, but it can only increase what someone is due, it can not decrease it. 

[DawnC · Accepted solution]

The 2020 tax return you are filing now will not be adjusted for the 3rd stimulus.   Only the first 2 payments affect the 2020 return.   The recovery rebate will be included if either one of the first payments was less than what you qualified for.    If you were overpaid, no adjustment is made; you just keep the excess.      

We are waiting on guidance regarding the 3rd stimulus payments that are going out now, specifically, guidance on how these will be reconciled.   However they are reconciled will be determined later, but it will not affect the processing of your 2020 return.    

They have mentioned possibly sending out supplemental payments in cases where the initial payment for the 3rd stimulus was less than what a household qualifies for.   For example - the IRS used the 2019 return and issued a check for $2800, but when the 2020 return is filed, the family qualifies for a $3200 payment.    But they have not confirmed exactly how or if they are going to deal with these cases before next year.