A third stimulus check is ongoing, but looks pretty likely. The White House aims to give most adults in the US $ 1,400 in stimulus payments by mid-March – in the middle of the tax season.
To get these payments quickly, the House Democratic plan calls for the use of 2019 or 2020 tax returns to calculate payments. This means that the IRS would use your 2020 tax return if it was already filed and accepted, or your 2019 tax return if it weren't.
For most people, it doesn't matter which tax returns the IRS uses for the year. You qualify for the full stimulus test in either case. However, there is one circumstance where you would want the IRS to use your 2019 tax return – which means that you will withhold filing your taxes for the final year.
Could filing taxes now cost you your third stimulus check?
For many people, the train wreck, the bad dumpster fire one year in 2020, was associated with a job loss or a significant reduction in income. But if you were one of the lucky few people who survived the year and made more money than 2019, it might be in your best interest to pause the filing.
The first stimulus check and the second stimulus check both started getting off with incomes over $ 75,000 for singles and $ 150,000 for married couples. The House Democrats' plan would also expire payments for those earning above these amounts. A single person who earns more than $ 100,000 or a married couple who makes more than $ 200,000 without dependent children would not be eligible.
If your 2019 and 2020 earnings were roughly the same, the filing on filing won't have much of an impact on your check. The same applies if your income is not close to these thresholds.
But it can make sense here: let's say you made $ 65,000 in 2019. In 2020, you made $ 90,000 for some reason – you got a big promotion, got a second job, and won a jackpot of $ 25,000.
For example, suppose the next relief bill contains $ 1,400 checks with an exit of $ 75,000 and a singles income limit of $ 100,000.
- $ 1,400 if your payment is based on your 2019 return.
- $ 560 if your payment is based on your 2020 return.
In the previous two economic reviews, payments were an advance on a 2020 tax credit, even though they were processed with the 2018 or 2019 tax returns.
If your 2020 income is found to be above the limits, you can still keep the payments. However, if you've made too much based on your 2018 or 2019 returns, but your 2020 income qualifies you for the first two checks, your tax refund can be used to get incentive money.
The third round is expected to work the same way. Bottom line: when you receive a stimulus check, you don't have to worry about the repayment.
Who should file their taxes right away?
For many people, filing a 2020 tax return will result in more stimulus money. Unless your income for 2020 is drastically higher than your income for 2019, you want to apply immediately if:
- They had a child in 2020.
- You were entitled to the previous two checks, but you did not receive them or received less than you qualified for, either for yourself or for the Child Stimulus Credits.
- You were claimed as a dependent in 2019, but cannot be claimed in 2020, which is true for many newer graduates.
- You were not eligible for the first two checks based on your 2018 or 2019 earnings, but you qualified for 2020 based on earnings.
No matter how quickly Congress moves here, it's important that you file your tax return by April 15th. Also, keep in mind that if you delay filing it, you will be delaying a tax refund.
Robin Hartill is a certified financial planner and senior editor at The Penny Hoarder. Send your tricky money questions to [Email protected].
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