Gress Income Tax Service

Latest Tax Developments

Updated 4/5/2021

ECONOMIC IMPACT PAYMENTS

Through this third round of Economic Impact Payments, the U.S. Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) are ensuring that Americans will receive fast and direct relief during the final phase of the COVID-19 crisis. As of yesterday, approximately 90 million Economic Impact Payments had been disbursed, thereby ensuring that more than $242 billion of much-needed relief will be received by millions of Americans and their families within days of enactment of the American Rescue Plan. Unlike the prior rounds of Economic Impact Payments, the American Rescue Plan requires a 2021 “true-up” additional payment, when applicable, based on information (such as a recently filed 2020 tax return) that the IRS receives mid-year during 2021. This additional Economic Impact Payment will ensure that Americans and their families receive greater amounts of financial assistance during 2021, rather than waiting to claim a Recovery Rebate Credit on a tax return in 2022.

Those eligible will automatically receive an Economic Impact Payment of up to $1,400 for individuals or

$2,800 for married couples, plus $1,400 for each dependent. Unlike the prior rounds of Economic Impact Payments, families will get a payment for all their dependents claimed on a tax return, not just their qualifying children under 17.

Normally, a taxpayer will qualify for the full amount if they have an adjusted gross income of up to

$75,000 for singles and married persons filing a separate return, up to $112,500 for heads of household, and up to $150,000 for married couples filing joint returns and surviving spouses. Payment amounts are reduced for filers with incomes above those levels.

The Treasury Department and the IRS continue to expand outreach to the millions of homeless, rural poor, and other disadvantaged Americans to ensure that they receive Economic Impact Payments. This includes new and continued relationships with homeless shelters, legal aid clinics, and providing Economic Impact Payment information in more than 35 languages.

CHILD TAX CREDIT

The American Rescue Plan’s expansion of the Child Tax Credit will substantially reduce child poverty by supplementing the earnings of families receiving the tax credit. Specifically, the Child Tax Credit has been revised in the following ways:

  1. The credit amount has been increased. The American Rescue Plan increased the amount of the Child Tax Credit from $2,000 to $3,600 for children under age 6, and $3,000 for other children under age 18.
  2. The credit’s scope has been expanded. Children 17 years old and younger, as opposed to 16 years old and younger, will now be covered by the Child Tax Credit.
  3. Credit amounts will be made through advance payments during 2021. Individuals eligible for a 2021 Child Tax Credit will receive advance payments of the individual’s credit, which the IRS and the Bureau of the Fiscal Service will make through periodic payments from July 1, to December 31, 2021. This change will allow struggling families to receive financial assistance now, rather than waiting until the 2022 tax filing season to receive the Child Tax Credit benefit.
  4. The credit is now fully refundable. By making the Child Tax Credit fully refundable, low- income households will be entitled to receive the full credit benefit, as significantly expanded and increased by the American Rescue Plan.
  5. The credit is now extended to Puerto Rico and the U.S. Territories. For the first time, low- income families residing in Puerto Rico and the U.S. Territories will receive this vital financial assistance to better support their children’s development and health and educational attainment.