Though the next coronavirus relief package has not been finalized yet, the prospect of a third stimulus check gives many taxpayers an incentive to file their 2020 taxes early.
That’s because the amount a household receives will likely be able to be based on 2019 or 2020 adjusted gross income (AGI). If a taxpayer’s income was cut in 2020 (or her household size changed), she’ll want to file her return with the Internal Revenue Service ASAP to maximize the size of her check.
In the draft legislation, the payments are worth up to $1,400 for individuals earning an AGI of up to $75,000 in 2019 or 2020, and $2,800 for married couples earning up to $150,000, plus $1,400 for dependents. For anyone making more than that, the size of the check is gradually reduced, hitting $0 at $100,000 AGI for singles and $200,000 for couples.
The IRS begins accepting tax returns on Friday, Feb. 12, before any new relief measures will be signed into law (Democrats have said they want to pass the legislation by mid-March). Those who file electronically, before the relief bill is passed, will likely have their stimulus payment based on that return.
For example: If a single taxpayer earned $100,000 in 2019, she would not receive any direct relief. But if her hours were cut in 2020, and her AGI came out to $70,000, she would qualify for the full $1,400. E-filing her taxes as soon as possible would yield her more money sooner than if she waited to file.
Conversely, those who wait to file their taxes will likely have their eligibility based on their 2019 AGI. So if a taxpayer’s income increased in 2020, waiting to file his return until the payments are disbursed could yield him more money. Taxpayers who earned more in 2020 did not have to repay any of their stimulus checks during the first two rounds, and there’s no repayment provision included in the House’s current draft. Like the first two checks, the payments are not taxable.
Right now, there’s no deadline to file taxes to have your check based on your 2020 income. Democrats in Congress are still working out the details of the checks, including the final income thresholds and phase out levels.
Here’s more information on how to claim the stimulus payments on your 2020 return.
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