Well, that happened pretty fast.
My Coronavirus Stimulus 2.0 hit my Fidelity (which has lightening fast ACH processing times) account this morning. If you don’t bank with Fidelity, presumably this will hit your account tomorrow?
Here’s what I understand about the new stimulus:
- $600/adult + $600/kid if aged 16 or younger.
- 5% phase out above $150k 2019 AGI for MFJ and $75k 2019 AGI for single.
- The formula to determine the size of payment is below:
Stimulus size = # people aged 16 or younger * $600 – 0.05 * (2019 AGI – 150k)
If single, replace $150k above with $75k. If income is below the phase-out region, ignore anything past # people aged 16 or younger * $600.
I confirmed the above and my stimulus payment matched the above to the penny.
With the first round of stimulus, the phase out region was recoverable when filing 2020 taxes in April of 2021 if 2020 AGI < 2019 AGI. I’ve personally confirmed this with FreeTasUSA’s currently available 2020 software.
I’ve yet to read anything indicating that the second round of stimulus is also refundable/recoverable in the phase-out region, but reason seems to indicate that it should also be recoverable. If anyone has information either way on this, please let me know.
This IRS link seems to indicate that round 2 of the stimulus is also recoverable (link):
Eligible individuals who did not receive an Economic Impact Payment this year – either the first or the second payment – will be able to claim it when they file their 2020 taxes in 2021. The IRS urges taxpayers who didn’t receive a payment this year to review the eligibility criteria when they file their 2020 taxes; many people, including recent college graduates, may be eligible to claim it. People will see the Economic Impact Payments (EIP) referred to as the Recovery Rebate Credit (RRC) on Form 1040 or Form 1040-SR since the EIPs are an advance payment of the RRC.
If the second round is indeed recoverable for those with 2020 AGI < 2019 AGI, this creates an additional implicit 5% marginal tax rate on income earned this year which is particularly relevant for those making Roth conversion and “Roth vs Trad” decisions. If true, it amplifies one’s implicit marginal tax rate by 10% relative to existing federal + state rates.