The COVID-19 pandemic shook the economy in ways that had never been seen before. To help, the US government sent stimulus payments to Americans. A lot of people want to know if the stimulus package in 2021 was an advance payment. Let’s find out.
Overview of COVID-19 Stimulus Packages
To cushion the economic blow of the pandemic, Congress authorized three rounds of stimulus payments:
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Stimulus 1: Up to $1,200 for each adult and $500 for each child under 17 who lives with them. Issued in Spring 2020.
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Stimulus 2 Up to $600 per adult and child dependent Issued in Winter 2020/2021,
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Stimulus 3 Up to $1400 per adult and child dependent. Issued in Spring 2021.
The first two rounds of stimulus were payments ahead of time for a tax credit in 2020. The third stimulus was an early payment of a tax credit for 2021.
The 2021 Stimulus Was an Advance Payment
It was officially called the third Economic Impact Payment (EIP) when it was sent out in 2021. It was an early payment of the Recovery Rebate Credit for 2021.
The key takeaway: The $1,400 stimulus checks issued in 2021 were prepayments of a tax credit that taxpayers later claimed on their 2021 returns.
Some key differences between the stimulus payment and the underlying 2021 tax credit:
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Eligibility: Slightly different eligibility rules applied for each. For example, some dependents qualified for the 2021 credit but not the advance stimulus.
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Amount: The stimulus payment amount was based on 2019/2020 income data, while the 2021 credit amount depended on 2021 income. So payment vs. credit amounts sometimes differed.
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Claiming the Credit: Taxpayers who didn’t get the full stimulus amount they were eligible for could claim the remaining credit on their 2021 return.
Impact on 2021 Tax Filing
Because the stimulus was an advance payment, it affects taxpayers’ 2021 returns:
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Taxpayers who qualify for the 2021 Recovery Rebate Credit but never got a stimulus payment can claim the full credit amount on their 2021 return.
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Taxpayers who received a stimulus payment but were eligible for a larger credit can claim the difference on their 2021 return.
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The 2021 Recovery Rebate Credit will reduce any tax owed or increase the tax refund for 2021.
The Bottom Line
The third round of stimulus checks, worth up to $1,400 per person, were advance payments of the 2021 Recovery Rebate Credit. This means taxpayers had to report the stimulus payment on their 2021 return. Those eligible for more than they received could claim an additional credit. Understanding the link between the 2021 stimulus and 2021 tax returns can help taxpayers get all the relief they deserve.
2021 tax filing information
Get your advance payments total and number of qualifying children in your online account. You can use your username and password for the Child Tax Credit Update Portal to sign in to your online account.
You can also refer to Letter 6419.
Reconcile your advance payments total on your 2021 tax return
If you received advance payments of the Child Tax Credit, you need to reconcile (compare) the total you received with the amount you’re eligible to claim. To reconcile advance payments on your 2021 return:
- Get your advance payments total and number of qualifying children in your online account.
- Enter your information on Schedule 8812 (Form 1040).
You can also refer to letter 6419.
If you received advance payments based on a joint return, each spouse is treated as having received half of the payments, unless one of you unenrolled.
To reconcile your advance payments on your 2021 tax return, add your advance payments total to your spouse’s advance payments total.
Each of you can find your advance payments total in your online account.
For the majority of taxpayers, the advance payments total in letter 6419 will match the total in online account.
If the advance payments total differs between your Letter 6419 and your online account, rely on the total in your online account.
Your online account has the most current advance payment information. Do not rely on Tax Transcripts for the advance payments total.
Keep letter 6419 for your tax records.
Frequently asked questions: Reconciling your advance payments
Is stimulus check an advance on 2021 tax refund?
FAQ
Can I claim stimulus payments in 2021?
(You can’t claim the first two stimulus payments on your 2021 tax return if you didn’t get any of them.) You will need to file a 2020 return if you haven’t yet done so, or amend the one you did file, to claim the earlier payments. ) 3. You can’t receive the $1,400 payment if you can be claimed as someone else’s dependent in 2021.
Will I get a stimulus check if I had a baby in 2021?
Answer: Unfortunately, if you had a child in 2021, you won’t get an additional $1,400 in your third stimulus check for him or her. That’s because your new bundle of joy wasn’t claimed as a dependent on your 2019 or 2020 tax return. On the other hand, you can get an extra $1,400 in tax credits for your new baby on your 2021 tax return.
What if I received a stimulus check in 2022?
The third stimulus check was an advance payment for the 2021 tax credit in response to COVID-19. When you file your 2022 tax return, you won’t get the new Recovery Rebate Credit if you already got the full amount you were entitled to. But if you received less than you are eligible for, you can claim the tax credit.
What is the 2021 stimulus package?
First proposed on January 14, 2021, the package builds upon many of the measures in the CARES Act from March 2020 and in the Consolidated Appropriations Act, 2021, from December. On February 8, 2021, the Financial Services and Education and Labor committees released a draft of $1.9 trillion stimulus legislation.
Do I have to pay back a stimulus payment in 2021?
In January 2022, the IRS sent out Letter 6475, which confirmed the total amount of the third stimulus payment that you should have received in 2021. You can also view what payment you were eligible for using the IRS online account. 7. You don’t have to pay back money you received in 2021.
When will my 3rd stimulus check be sent?
The IRS began issuing the third stimulus payments on March 12, 2021. Where will my third stimulus check be sent? If the IRS has processed your tax year 2020 return by the time your stimulus funds are disbursed, then you will receive stimulus funds through the same method used for your tax year 2020 return.
Can I still claim my 2021 stimulus check?
Taxpayers have three years to file a return and claim any refunds, credits or stimulus payments. So, the deadline for any remaining 2020 stimulus payments was Tax Day 2024, while the cut-off for 2021 payments was April 15, 2025.
How much was the 2021 recovery rebate?
Most taxpayers who were eligible for the stimulus payments have already received them directly, or later through the recovery rebate credit, the IRS said. However, the encourages non-filers to claim credits before the approaching April 15 deadline, as they may be eligible for the the up to $1,400 payment.
How much was the 2021 advance child tax credit?
Six monthly payments of $300 provided the eligible individual with $1,800. For each qualifying child ages 6 to 17, an eligible individual generally received $250 each month.
What was the 2021 stimulus check amount?