12 Feb File Earlier to Get a Bigger Tax Check in 2021
Congress and the President continue to work on approvals for the 3rd stimulus package. They continue to tout $1,400 as the maximum amount you could receive. However, the size of YOUR next stimulus check might depend on when you file your tax return. For many Americans, income in 2020 was lower than it was in 2019 because of the pandemic-induced recession. Stimulus payments up to $1,400 per person are limited to household income, it matters which year payments are based on.
File sooner so the 3rd Stimulus payment is based on your lower 2020 income
On Dec. 27, then-President Trump signed the massive COVID relief bill into law. This included a wrinkle a “lookback rule” that allows filers to use either their 2019 OR 2020 for income tax purposes. So why would it matter when you file your tax return? That’s because Congress is likely to tell the IRS to use 2019 or 2020 income — whichever the government has when the Stimulus Payment is made. This is according to the Senate Finance Committee. Those who file soon after the Internal Revenue Service starts accepting returns on Feb. 12 will likely have their payments based on 2020 income and family size. Those who wait to file will have their Stimulus Payments based on 2019 income and family size. If you file electronically, your return is processed almost immediately, and the information is then available to the IRS almost instantaneously.
Fast Filing equals Bigger Check
Fast filing could yield a big benefit for those who saw their incomes drop during the pandemic last year — the very people Congress wants to help the most. The window for exploiting the ability to use 2020 income as a basis for the payments might be limited. Democrats, who control the House and Senate, will determine income thresholds, phaseouts, and other details soon. They want to complete the relief bill by mid-March. Once Congress settles on the details of the payments, even before the final vote, the IRS can start doing computer programming so it can send payments soon after President Biden signs the bill.
At this point, there’s no clear cutoff date for when people should submit their returns to make sure the IRS uses 2020 income. During the filing season, the IRS typically gathers taxpayers’ information periodically and sends that data to the part of the Treasury Department that makes payments. For example, a person who made $150,000 in 2019 but just $50,000 in 2020 would get nothing if the IRS uses 2019 information. But the same person would likely get $1,400 if they have already filed their 2020 return. People who had a baby during 2020 might also be eligible for more money if the IRS uses that year.
What to do if you made more money in 2020?
People whose income rose in 2020 can also benefit — by not filing quickly. If they know they would get more money if the IRS bases stimulus payments on 2019 data, they can wait to file 2020 returns until after they receive the payments. For example, an individual who made $50,000 in 2019 and $150,000 in 2020 would likely get $1,400 if the IRS uses the earlier year’s information, but nothing if they have already filed their 2020 return.
Get all the benefits you are entitled to
That leaves a trickier question: What should happen for people who get the next payments based on their 2019 income but would get more if they used 2020 income? Lawmakers have emphasized speed and breadth of payments over precision, but that approach can leave behind people affected by changes in income, family size, or technical glitches. If you didn’t receive your full benefits from any of the Stimulus Package get information about the Recovery Rebate Credit from our blog “The Recovery Rebate Credit” to ensure you get all stimulus monies owed to you.
Latest updates on passage of the 3rd Stimulus Package
Five House committees worked Wednesday on their pieces of sweeping legislation that would send $1,400 payments to some Americans all part of the $1.9tn stimulus bill. The House Ways and Means Committee on Thursday approved a $593.5 billion portion of the covid-19 relief bill. The majority of which goes toward the third round of stimulus checks Thursday also saw, House Speaker Nancy Pelosi told reporters that the House hopes to pass its massive economic aid package, including $1,400 stimulus checks, by the end of February, and fully expects it to be on the President’s desk in time to offset the March 14 deadline where some unemployment benefits will expire.
FINAL THOUGHTS: Less talk and quicker action!
As president Biden continues to talk about unity – can we see some unity in Congress? Does it really take 3-4 months to get the 3rd Stimulus Package passed? I understand that it’s $1.9tn and that is a huge number. But how about having the government not just “Talk the Talk” about unity, but actually “Walk the Walk” around unity and get this done now. Families are struggling to pay their rent and put food on the table right now. Getting this relief in a few months doesn’t help buy groceries today!
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