When to file your tax return if you have received a stimulus check?
If you saw your income adversely affected in 2020 by the pandemic you may want to file your tax return early to be sure to get a stimulus payment sooner.
When you file your tax return could determine how much you get from Uncle Sam. If your income was reduced in 2020 you may be eligible for a larger stimulus check so filing early with the IRS could get you a payment sooner. Likewise, if you saw your income go up significantly in 2020, you may want to wait to file.
Many Americans saw their income drop in 2020 due to the recession brought on by the pandemic. The previous two rounds of stimulus checks were based on income earned in 2019 or even 2018 due to the timing of the pandemic, when the first round was approved and delays in processing returns in 2020.
When should you file your tax return?
The IRS will begin collecting and processing 2020 tax filings starting 12 February and taxpayers will have until 15 April to get the forms in. Tax filers can start entering their information electronically already through a number of online tax programs like H&R Block, TaxSlayer or Intuit Turbo Tax or the IRS Free File online tool. The IRS recommends using the electronic tools and direct deposit to speed up processing and similarly they can get a refund out to you faster if you have one coming.
Congress is currently working on sending out a new round of $1400 direct payments with the aim of getting the coronavirus relief bill out by mid-March. It is expected that the new round could have lower eligibility requirements than the previous rounds that went out in the spring and January this year. The debate is still raging among congressional Democrats but Biden has said he is open to more targeted direct payments.
Once approved, the IRS will use the most current data that they have to determine whether or not you will get a payment based on the eligibility requirements in the bill. That means if your income was drastically reduced in 2020 due to the pandemic, it would be in your interest to file early to be sure the IRS knows your situation and so you will get a $1400 stimulus check sooner. The contrary would also be the case but you have to file before 15 April.
Furthermore if you had an addition to your family in the last year, that could also increase the amount you could receive. This could be either through a direct payment for dependents or the Child Tax Credit proposed in Biden’s American Rescue Plan should it make it into the legislation. Word to the wise though, you will need to have a Social Security Number for your kids to be eligible.
What are the eligibility requirements for the stimulus checks?
Congress is writing the legislation for the next covid-19 relief bill and there aren’t any hard numbers yet. In the previous rounds the upper limit for a full payment was annual gross income of $75,000 for individuals and $150,000 for couples, with the amount phasing out as individuals exceeded that threshold. There currently is no consensus on what the eligibility cap would be for future stimulus checks but the $50,000 and $100,000 respectively have been floated.
If you received a stimulus check in the first two rounds but saw you received less than you should have due to a change in your family or financial situation between your 2019 and 2020 income-tax filing, you can claim the additional funds on your 2020 income tax return.
On the other hand, if you were one of the lucky individuals who saw your income increase over 2020 making you ineligible for the direct payments but you received one, fear not. The laws authorizing the previous payments didn’t require people to pay back the money received.
Do I have to declare the stimulus payments on my tax return?
The direct payments, also known as Economic Impact Payments or stimulus checks, are not taxable. But you do have to enter the amount that you received on your 2020 income tax filing. If you use one of the IRS Free File online tool or poplar online tax programs like H&R Block, TaySlayer, Intuit TurboTax, etc. the programs will ask you if you received a direct payment.
Recovery Rebate Credit
If you missed out on any of the Economic Impact Payments you can file for them through the Recovery Rebate Credit on your 2020 tax return. You will find it on Line 30 of this year’s 1040 form. You will need to know the amount of any Economic Impact Payments issued to you to claim the Recovery Rebate Credit. Those payments will reduce the amount due to you in the Recovery Rebate Credit.
Third stimulus check: live updates
You can get the latest updates on the proposed third stimulus check, and other mooted aid measures such as the expanded child tax credit, by following our dedicated live blog.