Higher-Income Americans Received $1,400 Stimulus Checks. What Gives?

The most recent round of stimulus checks was supposed to exclude higher earners. Apparently, it didn't.

Millions of Americans saw $1,400 stimulus checks hit their bank accounts after the American Rescue Plan was signed into law in mid-March. But that most recent stimulus round differed from the previous two rounds in that the cutoffs for eligibility were lowered.

For all three stimulus rounds, the income thresholds to receive a full stimulus were:

• $75,000 for individual tax filers
• $112,500 for heads of household
• $150,000 for couples filing jointly

From there, payments were phased out at different levels per round. For the most recent round of $1,400 checks, stimulus payments were cut off once income exceeded these thresholds:

• $80,000 for individual tax filers
• $120,000 for heads of household
• $160,000 for couples filing jointly

But new data from the IRS reveals that some people with incomes above $200,000 received a third stimulus check. In fact, close to 128,000 payments were sent out to people in that category, for a total of over $392 million. Here's why that happened.

Some higher earners got a windfall anyway

The main reason so many higher earners wound up getting stimulus payments boils down to the method the IRS used to determine eligibility. The IRS relied on data from filers' most recent tax returns to see if they qualified for a stimulus check.

The American Rescue Plan was signed into law in the middle of March, and this year's tax-filing deadline didn't occur until the middle of May. That meant a lot of people hadn't yet submitted their 2020 taxes by the time the IRS was ready to start issuing payments. Not wanting to hold things up, the IRS looked at whatever 2019 data it had on file. But in some cases, once those 2020 taxes came in, some people who received stimulus checks were shown to have earned more money that year than in 2019.

In fact, some people were actually advised to hold off on filing their 2020 tax returns if they knew their income was higher that year than in 2019. And here's the kicker: Those who received a stimulus based on 2019 income but wouldn't have qualified based on 2020 income do not have to pay that money back.

On the flipside, those who earned less in 2020 than they did in 2019 have been receiving plus-up payments in situations where they either didn't get a third stimulus check at all or got a lower stimulus based on 2019 earnings.

Meanwhile, the IRS still isn't done issuing stimulus payments as part of this latest round. Now that the agency has more 2020 tax information to sort through, it may take some time to get stimulus funds into the hands of everyone who's eligible.

The IRS will also start sending out monthly payments for the newly expanded Child Tax Credit in mid-July. Normally, that credit is paid out as a single lump sum, but as part of the American Rescue Plan, eligible recipients will get half of it in monthly installments between July and December, with the remainder to be paid in 2022.