What Is an Economic Impact Payment (EIP)?

Economic Impact Payments (EIPs) were direct payments from the U.S. government to individuals and families. These payments served as a form of economic relief during a period of national financial strain. Their primary purpose was to provide direct financial support to households and to stimulate the broader economy by encouraging spending.

Defining Economic Impact Payments

Economic Impact Payments, often referred to as “stimulus checks,” were advance payments of a refundable tax credit known as the Recovery Rebate Credit. These payments were authorized through three distinct legislative acts. The Internal Revenue Service (IRS) clarified that these payments were not considered taxable income, meaning recipients did not need to report them on their federal tax returns.

The first payment, established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, provided up to $1,200 per eligible adult and an additional $500 for each qualifying child under age 17. A second payment followed, authorized by the COVID-related Tax Relief Act of 2020 in December 2020, offering up to $600 per eligible adult and $600 per qualifying child. The third and final payment, signed into law through the American Rescue Plan Act of 2021 in March 2021, provided up to $1,400 per eligible individual, $2,800 for married couples filing jointly, and an additional $1,400 for each qualifying dependent.

Eligibility for Payments

Eligibility for Economic Impact Payments largely depended on Adjusted Gross Income (AGI) thresholds and filing status, with requirements varying slightly across the three rounds. For the first two payments, individuals generally qualified for the full amount if their AGI was up to $75,000 for single filers, $112,500 for heads of household, and $150,000 for married couples filing jointly. The payment amounts were reduced for incomes exceeding these thresholds and phased out entirely at higher income levels.

The third payment also used similar AGI thresholds for full payment amounts: $75,000 for individuals, $112,500 for heads of household, and $150,000 for married couples filing jointly. However, the phase-out ranges were narrower, meaning payments phased out entirely at $80,000 for single filers, $120,000 for heads of household, and $160,000 for married couples filing jointly. A significant change in the third round was that payments were extended to all qualifying dependents, regardless of age, unlike previous rounds which generally limited dependent payments to children under 17.

Individuals needed a Social Security Number (SSN) valid for employment to be eligible for payments, including for any dependents claimed. There were provisions for non-filers, those who typically do not file a tax return because their income is below the filing threshold. For the first two rounds, the IRS provided a “non-filers” tool on its website to allow these individuals to register their information and receive payments.

Recipients of federal benefits, such as Social Security beneficiaries, Supplemental Security Income (SSI) recipients, and Railroad Retirement Board (RRB) beneficiaries, generally received payments automatically without needing to take additional action. However, if federal benefit recipients had qualifying dependents and did not file a tax return, they sometimes needed to provide additional information to ensure they received the full payment for their dependents.

Payment Methods and Delivery

Economic Impact Payments were disbursed through several methods to ensure broad reach. The primary and fastest method was direct deposit into a bank account, utilizing account information the IRS had on file from recent tax returns. If direct deposit information was unavailable or outdated, payments were typically sent as paper checks via mail. A third method involved prepaid debit cards, known as Economic Impact Payment (EIP) Cards.

EIP Cards were sent in a plain white envelope displaying the U.S. Department of the Treasury seal and often identified as coming from “Money Network Cardholder Services.” Upon receipt, recipients needed to activate the card by calling a toll-free number or visiting a designated website, providing their Social Security number and creating a PIN. These cards could be used for purchases, cash withdrawals at in-network ATMs, or to transfer funds to a personal bank account without fees.

The IRS provided an online tool called “Get My Payment” to allow individuals to check the status of their payments. This tool indicated whether a payment had been processed, the method of delivery (e.g., direct deposit or mail), and the date it was sent. It was designed for status checks of already issued payments, not for claiming missing funds. It is important to remember that the IRS does not contact individuals by phone, email, text, or social media to request personal or financial information related to EIPs; such communications are scams.

Addressing Missing or Incorrect Payments

If an individual believed they were eligible for an Economic Impact Payment but did not receive it, or received an incorrect amount, the primary method to address this was through the Recovery Rebate Credit (RRC). The RRC is a refundable tax credit claimed on a federal income tax return. The first two Economic Impact Payments were advance payments of the 2020 Recovery Rebate Credit, while the third payment was an advance of the 2021 Recovery Rebate Credit.

To claim any missed or additional RRC, individuals needed to file a federal income tax return for the relevant year, even if they were not otherwise required to file. For the 2020 Recovery Rebate Credit (related to the first and second EIPs), this was claimed on Line 30 of Form 1040 or Form 1040-SR for the 2020 tax year. For the 2021 Recovery Rebate Credit (related to the third EIP), it was claimed on Line 30 of Form 1040 or Form 1040-SR for the 2021 tax year. The IRS provided worksheets in the instructions for Form 1040 and 1040-SR to help taxpayers calculate their eligible credit amount.

If a tax return for the relevant year had already been filed without claiming the full RRC, an individual could file an amended tax return using Form 1040-X, Amended U.S. Individual Income Tax Return. When amending, it was important to specify “Recovery Rebate Credit” in the Explanation of Changes section of Form 1040-X. The IRS would not automatically calculate or correct the RRC if the line was left blank or zero was entered, necessitating an amended return to claim the credit. Taxpayers were advised to keep records of any EIPs received, as this information was necessary when calculating the RRC.