One of the more tax-troubling issues this year has been the distribution of what Congress referred to as the recovery rebates. You may know these payments as the Economic Impact Payments (EIPs) or stimulus payments, names that the IRS took the liberty of creating. These payments were meant to provide financial assistance to individuals and families struggling during the initial outbreak of the COVID-19 pandemic.
Congress authorized the payment amounts in late March 2020, in the CARES Act, to be $1,200 for each filer ($2,400 if married and filing a joint return) and $500 per dependent child under age 17. Congress mandated that the IRS get these payments out as quickly as possible. However, the payments were phased out for higher-income taxpayers at a rate of 5% of the taxpayer’s adjusted gross income (AGI) in excess of a threshold, also based upon the taxpayer’s AGI.
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