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The timing of filing a tax return for 2020 is very important this year; if you hit it right, you could trigger greater stimulus control.
This week, the Senate is expected to take on President Joe Biden’s $ 1.9 trillion stimulus plan, which includes 1,400 stimulus checks on Americans receiving the full amount.
So far, payments are based on the same requirements as the first two checks: the total amount will go to people with adjusted gross incomes of up to $ 75,000 and married couples who jointly have incomes of up to $ 150,000. In addition, dependent children and adults may also be eligible for a $ 1,400 check.
Of course, some details could change in the coming days as the Senate reflects on the bill. However, the timing of filing 2020 taxes before or after exceeding the stimulus could make a difference in the size of the stimulus control received.
When it makes sense to file as soon as possible
One of the reasons for filing your 2020 tax return before the next Covid relief bill passes is if you’ve experienced something that changed your eligibility for a payment or means you’ll need to receive a higher amount, according to certified financial planner Luis Rosa, registered agent and founder of Build a Better Financial Future in Henderson, Nevada.
This includes things like lowering income from 2019 to 2020, having a baby, or bringing another child or dependent person into your home.
If this is the case, you could claim previous incentive payments due to your tax return as a recovery bonus credit and make sure you have the most up-to-date information recorded for the next round, he said. This can lead to a larger tax refund or reduce the amount you may owe to the IRS.
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If you’re someone who hasn’t had to file a tax return before, you’ll need to file one this year, as it’s the only way to claim incentive checks that were due to you and make sure the IRS has your information for future payments.
Those who have changed bank accounts or moved in the last year may also want to file their taxes now. As with previous stimulus payments, the IRS will send the next ones first by direct deposit through the registered bank account and then by email to which addresses they have.
If the IRS has an incorrect address or bank account, you could significantly delay receiving any nearby stimulus checks and may mean that you do not get one. If this happens, you may have to wait to claim the money on next year’s tax return.
“Ultimately, you can get the stimulus in your 2021 return,” said Henry Grzes, senior manager of tax practices and ethics at the American Institute of Certified Public Accountants. “The problem is if you need the money today, waiting until March 2022 to get the money won’t help you.”
When it may make sense to wait
Of course, it may make sense for some people to wait to show up for greater stimulus control.
If you make more money in 2020, you may not be able to qualify for a payment or get a lower amount.
This means that some people may want to file their tax return once Covid’s latest bill has been approved and any incentives have been extinguished, so the payment is calculated with the 2019 information. If you can be included in that category, it may be worth preparing the 2020 taxes to see what your adjusted gross income was and compare them to the guidelines in the latest stimulus bill, Rosa said.
“You can prepare your tax return and not file it so that you at least know where you are,” he said, adding that if you received a payment this way, you would not be penalized later. ‘The IRS would ask you to return the money.
Of course, withholding the filing of the 2020 tax return means delaying the refund of any refunds due. For some, waiting until after passing the stimulus bill to get a payment may not be worth it, according to Grzes.
“You don’t want to unnecessarily delay the filing of the 2020 statement, especially if you already have $ 2,000,” he said. And, if you owe it to the IRS, you will have to pay the bill before the April 15 filing deadline or you could incur penalties.
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