The third round of direct stimulus payments will begin to be disbursed to eligible taxpayers this weekend, the Biden administration said Thursday. This will be an economic relief for millions of households still struggling for a year with the coronavirus pandemic.
While the $ 1,400 payments will be based on the most recent tax return that the Internal Revenue Service (IRS) has registered for each taxpayer, if you lose income in 2021 and qualify for the third tax return, ‘stimuli for the first time, or part of it: you can claim it in the 2021 tax returns, which you will file in 2022, says Garrett Watson, a senior policy analyst at the Tax Foundation.
Eligible recipients who have a baby in 2021 will also be able to receive a dependent payment of up to $ 1,400.
“This is similar to the process that is being done now for the residual credits that are requested for the previous two payments,” Watson says. Eligible taxpayers who did not receive the first or second incentive payment or who received an incorrect amount, but who lost enough income in 2020 to qualify, can claim a recovery bonus credit on Form 1040. 2020.
This means that if you earn $ 80,000 in 2019, but only $ 60,000 in 2020, you could claim the credit.
Anyone with adjusted gross income (AGI) less than $ 75,000 and married couples earning less than $ 150,000 will receive the full payment of $ 1,400 or $ 2,800, respectively. After these limits, there is a very strong phasing out of income: people who earn $ 80,000 or more and couples who earn $ 160,000 or more will not get a third payment.
This small difference in AGI eligibility could encourage those who exceed the income limit to reduce their taxable income by 2021 so that they too can get a check. This can be done by contributing to a traditional 401 (k) IRA or IRA, among other strategies, which reduces a taxpayer’s AGI.
If a person earning $ 80,000 contributes $ 5,000 to a traditional IRA or 401 (k), it would reduce their taxable income enough to reach the $ 75,000 AGI eligibility limit for full payment of incentives, Watson says. Then they could get paid $ 1,400 when they filed their taxes in 2022.
Couples close to income limits with dependents have even more money at stake. A couple with three children who earned $ 161,000 in 2020 would receive $ 0 right now. But if the couple lost enough hours at work or contributed enough to a 401 (k) to reduce their AGI to $ 149,000 in 2021, they would receive $ 7,000 in retroactive stimulus payments next fiscal season, as well as one more tax credit. great for kids.
The IRS may be able to try to end payments for those who lose revenue later this year, so they don’t have to wait until the next tax season to collect the benefit. But Watson says it’s unlikely and the IRS hasn’t yet provided details on the process.
“The IRS has been hesitant to do so in previous rounds, as it can cause more problems than it solves,” such as incorrect payment amounts, Watson says. That said, “the president’s executive order asking the Treasury to find ways to get payments to people who haven’t gotten them can push them to reconsider.”
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