Congressional Research Service IN11575.3 (COVID-19 and Direct Payments to Individuals: Frequently Asked Questions (FAQs) About the Second Round of “Stimulus Checks” in P.L. 116-260)

Summary

A Congressional Research Service Insight, IN11575 (version 3), updated January 22, 2021, answering frequently asked questions about the second round of direct payments, often called "stimulus checks", in the Consolidated Appropriations Act, 2021 (P.L. 116-260). It notes that the first round was included in the CARES Act (P.L. 116-136) and that the statute calls the payments recovery rebates, while the IRS calls them economic impact payments. It states that the second-round payment equals a maximum of $600 per eligible individual ($1,200 for most married couples) plus $600 for each qualifying child under 17 years old, phasing down for higher-income households.

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INSIGHTi

COVID-19 and Direct Payments to
Individuals: Frequently Asked Questions
(FAQs) About the Second Round of
“Stimulus Checks” in P.L. 116-260
Updated January 22, 2021
In response to the continued economic weakness from the COVID-19 pandemic, Congress passed a
second round of direct payments as part of the Consolidated Appropriations Act, 2021 (P.L. 116-260). The
first round of direct payments were included in the CARES Act (P.L. 116-136). This Insight provides a
brief overview of the second round of payments—often referred to as “stimulus checks.” (The statute
refers to the first and second round of payments as recovery rebates, while the IRS refers to them as
economic impact payments or EIPs.) A comparison of major provisions of the first and second round of
payments can be found here.

How much are the payments?
Payments are generally issued per household with the total payment amount based primarily on a
household’s income and size. Specifically, the payment equals a maximum of $600 per eligible individual
($1,200 for most married couples) plus an additional $600 for each qualifying child under 17 years old.
The maximum payment amount phases down for higher-income households at a rate of 5 cents for every
dollar over $75,000 if single, $112,500 if single with dependents (i.e., head of household), or $150,000
for most married couples (i.e., married joint filers) as illustrated in the figure below. For example, a
married couple with two eligible children and income below $150,000 are to receive $2,400. For a
married couple with two eligible children and income over $150,000, the payment amount is reduced and
is zero when their income is $198,000 or greater.

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Who is eligible for the payments?
Most individuals—except nonresident aliens and individuals who can be claimed as dependents by
another taxpayer—are eligible. Estates and trusts are ineligible. Qualifying children are those for whom a
taxpayer can claim the child tax credit—that is, dependent children under 17 years old. Older children and
adult dependents are not qualifying children and thus are ineligible for these payments.
In addition, individuals who died before January 1, 2020, are not eligible for payments. For married
couples in which one spouse died before January 1, 2020, the maximum payment amount is halved (i.e.,
$600).
The Tax Policy Center estimates that 90% of all households will receive a payment.

Can individuals without Social Security numbers (SSNs) receive the
payments?
Generally no, with some exceptions for certain mixed status couples and military families.
All eligible individuals who are unmarried (i.e., file their taxes as single or head of household) must have
an SSN for the household to receive a payment, including any amounts for qualifying children. For
eligible individuals who are married and who file a joint return, the maximum amount of the credit is
prorated by the number of spouses with an SSN. In other words, married couples in which only one
spouse has an SSN (e.g., the other has an ITIN) will be eligible to receive up to $600 (instead of $1,200).
ITINs are issued by the Internal Revenue Service (IRS) to taxpayers who are not eligible for an SSN so
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that they can comply with federal tax law. ITIN users include many noncitizens who are unlawfully
present or unauthorized to work in the United States.
These taxpayer ID requirements are relaxed for married joint filers in which at least one spouse is a
member of the Armed Forces. In those cases, if one spouse provides an SSN, the married couple can
receive up to $1,200.
Individuals or couples without an SSN (i.e., an unmarried taxpayer does not have an SSN or neither
spouse of a married couple has an SSN) cannot receive payment for themselves or for any qualifying
child with an SSN.

How are the payments automatically issued?
As with the first round of direct payments, the second round of payments are structured as a new one-time
refundable tax credit against 2020 income taxes. Households do not need to file their 2020 income tax
return to receive the payment. Instead, the payments are automatically issued to eligible households, with
the IRS calculating the payment amount for most households using information (i.e., income, number of
eligible individuals and children, and taxpayer IDs) from 2019 income tax returns.
For eligible households who did not file a 2019 income tax return and who received Social Security,
Supplemental Security Income (SSI), Railroad Retirement, or certain Department of Veterans Affairs
(VA) benefits prior to enactment of P.L. 116-260, Treasury is directed to automatically issue payments
based on information provided by the respective benefit-paying agencies. Other individuals who provided
information to the IRS on the nonfiler portal to receive the first round of payments should also receive the
second round of payments automatically.
Generally, these payments are to be automatically issued to eligible households until January 15, 2021.
Eligible households who do not receive a second payment (or who receive less than they would if the
payment amount were based on their 2020 income and family size) will generally be able to receive the
payment (or receive an additional payment) as a refundable credit—the Recovery Rebate Credit—when
they file their 2020 income tax return. In contrast, if a household receives more than they are eligible for,
the difference generally does not need to be paid back.

How many payments have been made to date?
As of January 8, 2021, over 100 million payments have been automatically issued according to the IRS.
Data from the Treasury indicate that about $107 billion of the second round of stimulus checks have been
issued as of January 11, 2021. The total cost of these payments is estimated to be $164 billion.

Are the payments taxable and do they affect eligibility for other
programs?
No, these payments are not taxable. In addition, like other tax credits, these payments do not count as
income or resources for a 12-month period in determining eligibility for, or the amount of assistance
provided by, any federally funded public benefit program.

Can the payments be reduced for child support or other debts?
Generally no. These payments cannot be offset (reduced before being issued) for past-due child support or
to satisfy certain debts owed to governmental agencies, such as tax debts or unemployment compensation
debts. In addition, these payments generally would be exempt from debt collection actions, such as
garnishment or levy, that occur after payments are issued.
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Did P.L. 116-260 modify the first round of payments?
Yes, P.L. 116-260 includes several retroactive modifications to the first round of payments. Changes
include modifying the taxpayer ID requirements to conform to the requirements for the second round of
payments and clarifying the treatment of representative payees for both rounds of payments. Specifically,
if a direct payment for a specified Social Security, SSI, Railroad Retirement, or VA beneficiary is
deposited into the account of a representative payee (“rep payee”) or fiduciary, the law explicitly states
that it shall be used only for the benefit of the entitled benefic iary. The payee and fiduciary enforcement
provisions apply as under current law.

Author Information

Margot L. Crandall-Hollick
Acting Section Research Manager

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