On March 11, 2021, president Biden signed the massive $1,900,000,000,000 (that’s $1.9 TRILLION) American Rescue Plan Act of 2021 (ARP), which includes a number of key tax provisions, many of which are effective solely for the 2021 tax year. Of perhaps greatest interest to readers are the “stimulus checks” and the much ballyhoode minimum wage increase. But there’s a catch in the fine print.
The “stimulus checks” are the well-publicized $1,400 checks to be sent to “eligible individuals” perhaps as soon as the end of March, per Biden. The less-publicized part of this legislation is that these checks are just an advance against a credit that is to be calculated on individuals’ 2021 income tax returns.
The payment/credit will apply to taxpayers and their dependents who are “eligible individuals.” But not every taxpayer is an “eligible individual.” Nonresident aliens, dependents of another person, and taxpayers who are not natural persons (think: estates or trusts) are not “eligible individuals.” And the amount of the check “phases-out” for taxpayers whose adjusted gross income is, for single filers between $75,000 and $80,000 and, for joint filers, between $150,000 and $160,000. Taxpayers whose adjusted gross income is above the upper threshold amounts are out of luck: no payment or credit is allowed.
The legislation thus provides a direct payment of $1,400 for a single taxpayer, or $2,800 for a married couple that files jointly, plus $1,400 per dependent. Individuals earning up to $75,000 would get the full amount, as would married couples with incomes up to $150,000. But only if they qualify as “eligible individuals.”
Finally, despite attempts by some in Congress, the ARP does not include a change to the federal minimum wage.