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IRS/Treasury Update on EIP#3 and Tax Deduction for $10,200

By Terry Savage on March 15, 2021

The Treasury Department and IRS held a media call on Monday afternoon, updating information on tax issues related to the American Rescue Act, including the 3rd stimulus payment of $1400 and the tax waiver for some unemployment benefits.
Here are Key Points:

EIP #3 (Third Stimulus Payment)

• NO action is needed by most EIP recipients.
• EIP#3 will be based on the most recent, processed, tax form the IRS has on file – either 2019 or 2020. If your 2019 form
was used and you were not eligible, but are eligible based on 2020, they will review your 2020 return when filed and if you qualify
for either a higher payment or the full amount, they will send a supplemental payment. But if you still haven’t received the EI{ #3,
then you can claim the 3rd payment on your 2021 return, next year.)
• Payments of $1400 will be sent to every person, including dependents of all ages, based on income qualifications (see below).
Children of all ages, college students, disabled adults, parents and grandparents are included in this group.
IMPORTANT: If a person is listed as a dependent on a return, the stimulus payment will be sent to the person who filed the return.
• Income to qualify is as previously noted:
o $150,000 if married, filing jointly (none above $160,000 AGI)
o $112,500 head of household (none above $120,000 AGI)
o $75,000 single or married filing separately (none above $80,000 AGI)

• Direct deposits began on Friday, March 12th, and some banks may hold them for a few days before making the money available.
• As with the first stimulus payment, money will be sent directly to Social Security retirement recipients, SSDI, Railroad Retirement
beneficiaries, and VA beneficiaries. That includes people who registered on IRS non-filer records last year. Basically, if these
agencies have your direct deposit banking info you should get your $1400 stimulus payment that way – and very soon!
• Those who do not have any direct deposit information on file will receive paper checks from the Treasury OR debit cards. They have
redesigned the envelopes so people are more aware that the EIP debit card is inside!
SPECIAL NOTE: A NEW debit card will be sent out – and no payments will be added to debit cards from the last round of stimulus
payments.

UNEMPLOYMENT TAX EXEMPTION for $10,200 of unemployment benefits

For those who have not filed their 2020 return, the IRS has just posted instructions for how to claim this deduction on 1040, Line 7. They expect all tax software programs to be updated for this change in the next few days. Here is a link to those instructions:

If you have ALREADY filed your 2020 taxes, and of course didn’t know about this unemployment tax exemption, the IRS promises to make an announcement soon about how to deal with this issue. At this time, do NOT file an amended return until the IRS announces the proper procedure.

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