With another stimulus bill on the verge of going into law halfway through tax season, filing now or later may affect how much you get in your next stimulus check.
If your income dropped in 2020 compared to 2019, you should file immediately online. But if it increased, you might consider waiting until the payments are issued before filing your federal tax return.
“It probably is beneficial if your 2020 income is less than your 2019 to file your tax return immediately,” Lewis Taub, a certified public accountant and New York director of tax services at Berkowitz Pollack Brant Advisors, told Yahoo Money. “If you don’t do that and you miss the actual cutoff point, you’ll be able to get the difference of what you were actually owed on the 2021 return.”
If your 2020 income was below $80,000 for single filers and $160,000 for joint filers, you would be eligible for some amount of the potential third round of $1,400 stimulus checks, according to the Senate version of the $1.9 trillion stimulus package that passed the chamber on Saturday. The bill heads back to the House to vote on the amended version before going to the president for his signature.
If you file your return now electronically online, the Internal Revenue Service may be able to process it and use it to determine your eligibility for the next payment. Filing a paper return may take eight to 10 weeks, according to Taub, which is not fast enough.
If you’re too late, you likely will be able to claim the difference or your whole stimulus check on next year’s tax return. Taxpayers can claim any outstanding amount for the first and second stimulus checks using the Recovery Rebate Credit when filing their 2020 taxes.
‘A situation where you shouldn’t have gotten a stimulus payment’
If your income increased to above those same thresholds, hold off on filing your return until after the IRS issues the new round of payments. Otherwise, you may not be eligible for a third payment or you may get a smaller amount. By waiting, you can get a bigger payment and won’t have to return it.
“You may be in a situation where you shouldn’t have gotten a stimulus payment at all or you got a bigger stimulus payment,” Taub said.”If you get more than you should have, you don’t have to return the money.”https://flo.uri.sh/visualisation/5273735/embed?auto=1
But holding off on your taxes to get a bigger stimulus payment may not be the best decision for some. If the government owes you a large refund and you need the money now, filing your taxes sooner rather than later is paramount, according to Taub.
“All kinds of factors that have to be taken into account when making the determination which will be the better year to get the most amount of money from the third stimulus check,” he said.
President Biden’s $1.9 trillion stimulus package passed the House last week and is expected to be put for a vote in the Senate this weekend. If passed, the package would go back to the House to vote on the amended version and then sent to the president to be signed.
Lawmakers are aiming to pass the package by March 14 when key federal unemployment programs expire, leaving millions of Americans with no benefits.