Stimulus Funds Further Explained, Rounds 1-3, Those Near Phase Out Likely Very Important Information For You Here!

Last Friday here in this post we mentioned that we had accidentally stumbled onto an explanation of the stimulus checks and especially with regards to those folks near the phaseout area.

If you have received all of your and your family’s stimulus checks or if you have received no stimulus checks and your income is the same or higher please carry on this article is not for you but feel free to share with a friend or colleague who might be in this situation.

Round One Stimulus $1200 adult, $500 Qualifying kids

Stimulus Rounds Reminder From Our Q 2 2020 Newsletter

Round 1 : $1200 adult, $500 qualifying kids

Checks Being Sent to Over 90% of the population 

Each person to receive $1200, kids UNDER age 17 credited to parents at $500 each, no limit in headcount. 

This Rebate is NOT TAXABLE! 

The payout is likely to be sent out end of April or early May! 

There is a phase out: 

The applicable AGI phase out threshold amounts are as follows: 

  • Married Joint: $150,000 
  • Head of Household: $112,500 
  • All Other Filers: $75,000 

This phase out is based on either your 2018 or 2019 tax return, whichever is most recent. If your income exceeds the threshold and you are phased out completely, and your 2020 income is below the threshold when you file your 2020 tax return, you will receive your Recovery Rebate at the time of your 2020 filing. 

If you did not originally receive round 1 or were partially phased out the key is this last underlined sentence. If your 2020 Income drops into the threshold of receiving some or all of the prior stimulus assuming your 2019 income was higher and you did not receive any or all of your 2020 rebate, it is showing up on the new sneaky Line 30 of the 1040!

But hold on that’s not all  January 2021 – Round 2 $600 Stimulus

Another new phase out:

For every $100 of Adjusted Gross Income (AGI) a taxpayer exceeds their applicable threshold, $5 of Additional Recovery Rebate will be phased out. Thus, the phaseout range varies from taxpayer to taxpayer, depending upon the size of their ‘base’ Additional Recovery Rebate in the first place (i.e., the more eligible individuals, the larger the dollar amount to be phased out at $5 per $100 of AGI, and the more income it will take to fully phase out the rebate check!

If you were phased out based on 2019 return and qualify based on your 2020 return, this will also show up on the sneaky Line 30 of your 1040!

But hold on that’s still not all- Round 3 the $1400 check -Sept 1, 2021 Lookback

Another More Cliff (Fast) Phase Out

Individuals earning $75k will be phased out at $80k and JT $150k phased out at $160k

Individuals/Families who had a higher 2019 income that knocked them out of some or all of the stimulus original money but a lower 2020 income assuming this person would have qualified for the $1400 per person stimulus based on year 2020 … what the IRS is going to do concerning this matter is on September 1st 2021 they’re going to review all of the 2020 tax returns for folks who had not received the $1400 credit for them and their family and if they meet that threshold they will then receive the $1400 credit period remember this is the much faster phaseout of only $160k and $80k Joint and for an individual.

But Hold on that’s still not all – Not Kidding! Tax Return Year 2021 Look Back!

Assuming you were not below the thresh hold for 2019 or 2020 return, If a person’s income in 2021 were to drop below the new thresholds .. think next year around this time… you will still qualify for the $1400 credit . They are using the same play book as the original March 2020 rebate look back to give an extra year of the $1400 being credited and it would then show up on sneaky line 30 form 1040 tax return for 2021!.

It’s very likely that this will cause great confusion next year … even more than it is causing this year because it will be so much farther in the future .

Important planning technique for this year for people who have failed the 2019 and 2020 income tax level. Should you be able to control your income in some way form or fashion it may be worth you keeping an eye on your total income this year tax year 2021 and attempting to keep it below the current quick phaseout levels in order to receive the $1400 per person benefit next year. Just a thought  

To Summarize Round 1, 2 and 3

A lower 2020 income may bring some or all of the Round 1 and 2 onto Line 30 of your 1040 at the time of fling your 2020 Form 1040 income tax return.

The IRS will look at all returns who did not already receive the Round 3 $1400 stimulus on September 1, 2021 and if you qualify, sometime shortly there will be another $1400/person sent. If you fall into this category, or think you may, DO NOT FILE AN EXTENDED EXTENSION – If you file after September 1, 2021 you will have missed the look back window!

If you fail all of these tests, there will be one last check this time next year for your 2021 return, and if that is lower you will receive the $1400 at that time.

Wow…. Clear as we could be, but it is confusing!

We will have a more detailed article in the coming Newsletter as well as reminders here as we hit deadline dates!

Have a Great “Round 1-3 Stimulus Update” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.



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