IRS Sends Second Round of Stimulus Payments

What You Should Know:

On December 27, 2020, the fourth COVID-19 relief package was signed into law. The $900 billion relief package, the Coronavirus Response and Relief Supplemental Appropriations Act, was combined with a larger omnibus bill that included annual government funding for Fiscal Year 2021.

This relief package included a second round of Economic Impact Payments (EIPs). The IRS began sending EIPs by direct deposits on December 29, and paper checks began to be mailed on December 30. Pre-paid debit cards (EIP Cards) have been mailed out in January. The IRS has planned to complete sending all payments by Friday, January 15, 2021. In this round, the payments are $600 for individuals or $1,200 for married couples, plus another $600 for each child under the age of 17, with the amounts phased out at higher income levels.

In general, everyone who received a payment in the first round will automatically receive a second payment, including those who receive Social Security retirement, survivor or disability benefits, Railroad Retirement benefits, Supplemental Security Income (SSI) benefits, and Veterans Affairs benefits. Anyone who missed deadlines to register for a payment (or had other issues with receiving a payment) will be able to claim it in the form of a refundable tax credit when they file their tax return for 2020 in 2021.

Because these payments are like tax refunds, the funds are not counted as income or as a resource for determining eligibility for SSI and other needs-based benefits for a period of 12 months from receipt. The Social Security Administration (SSA) has issued instructions for the treatment of these payments for SSI purposes, available for download here. Although SSA issued these instructions when the first round of EIPs were being sent under the CARES Act, they also apply to the second round of EIPs.

However, like the previous round of EIPs, people who are undocumented, lack Social Security numbers (SSN), file with an Individual Taxpayer Identification Number (ITIN), or adults who were claimed as dependents on another’s taxes are not eligible for an EIP under the second round.

For this round of payments, there is a significant change in eligibility for households where one spouse has a work-eligible SSN and the other spouse does not. In the first round, the general rule was that families where only one member of a married couple had an SSN were not eligible. The new law changes that so that both the spouse with a work-eligible SSN and the qualifying children in the family are eligible for a payment, even if the other spouse is not work eligible. These families can claim both rounds of payments by filing a 2020 tax return in 2021.


NCLER: Stimulus Payments and Representative Payees: What You Need to Know