The stimulus payments that have been issued over the past year to provide financial relief related to the COVID-19 pandemic are an advance of a tax credit called the Recovery Rebate Credit. The first and second stimulus payments were an advance of that tax credit for your 2020 federal tax return, meaning they were – ultimately - reflective of your 2020 tax year. At this time, it has not been formally announced what tax year the potential third stimulus payment will apply to. Our estimation is that it will be an advance of the Recovery Rebate
Credit on your 2021 tax year, but the IRS will be instructed to use your 2020 tax return information to calculate your payment. The credit will then be reconciled on your 2021 federal tax return when you file it next year. That is a similar process to what occurred with the first and second stimulus payments. Those payments were originally calculated based off your 2018 or 2019 tax return information but are now being reconciled on your 2020 federal tax return.