More stimulus checks coming, how to get the most you can

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President Trump shocked many Americans yesterday when he suggested that an additional round of stimulus checks were on the way.

There had been a lot of back-and-forth talks over the past couple of months on whether or not more checks will go out to Americans.

The focus had drifted towards other benefits like payroll tax credits, back to work credits, and even special vacation credits.

So many people were pessimistic about more checks coming out (although I always thought there was a good chance of them coming out).

It sounds like an agreement for the next round of checks will be made in a few weeks, or at least we will know the details.

This suggests that the next stimulus package will likely contain aid in the form of stimulus checks and I believe it will likely be finalized before the August 8 recess.

This means that checks could start going out late August or early September.

This is an interesting timeline for many people because the new 2020 filing deadline for taxes is July 15th.

Your eligibility for the next stimulus checks will almost assuredly be based on your income filed with the IRS.

For the first round, your eligibility was determined on your 2018 or 2019 taxes — whichever one was the most recent one filed.

But now that the deadline for filing your 2019 taxes will be before more checks come out, it’s likely that many people will have to base their eligibility on 2019 taxes.

This could either help or hurt you depending on what your income did in 2019.

I think something that some people may want to consider is filing a Form 4868 extension on their IRS taxes if their income increased to make them ineligible for stimulus checks or simply decreased their expected payment.

Recall these are the expected HEROES Act eligibility requirements:

  • Married filing jointly: 100% eligibility up to $150,000, then reduced by 5% up to $198,000.
  • Heads of household: 100% eligibility up to $112,500, then reduced by 5% up to $136,500.
  • Single: 100% eligibility up to $75,000, then reduced by 5% up to $99,000.

So if you are single and your income increased from say $70,000 to $100,000 from 2018 to 2019, you may have lost $1,200 in eligibility. That could be very painful considering that many people have decreased income in 2020.

But something to know is that it is possible to file an extension for your IRS tax returns and if you pay your taxes by the deadline, you can avoid penalties.

I want to make clear that I am not a CPA or professional tax advisor so this is something you definitely want to get professional advice on before doing.

Here’s what the IRS states re: Form 4868.

Although you aren’t required to make a payment of the tax
you estimate as due, Form 4868 doesn’t extend the time
to pay taxes. If you don’t pay the amount due by the
regular due date, you’ll owe interest. You may also be charged
penalties

So it sounds like you could pay your taxes to avoid a penalty but simply file an extension for filing your taxes so that your 2019 income is not reported to the IRS until after the next round of stimulus checks goes out.

But even if you can’t pay your full taxes, if you file for a filing extension and if it is granted, you may only have to pay a nominal amount of your taxes due such as 1%.

Here are with the fees could look like:

  • 0.5% of tax not paid by due date, April 15 [July 15]
  • 0.25% during approved installment agreement (if return was filed on time, and taxpayer is an individual)
  • 1% if tax is not paid within 10 days of a notice of intent to levy

That .5% could be significantly lower than the amount you would receive from the IRS in the form of stimulus checks considering that families could receive up to $6,000.

Imagine that you owed $20,000 on your taxes, one percent would be $200. But by paying that $200 fee, you could allow yourself to be eligible for a few thousand dollars in stimulus payments.

The longer you wait to pay, the more you’ll be paying in fees.

Note that the penalty for filing late is higher, usually 5% of the amount due for each month or part of a month your return is late. So filing late without an extension is much more costly.

Again, this is absolutely something you need solid professional tax advice on. Often these fees can get complicated and involve multiple factors.

And we still don’t know 100% for certain that checks are coming (although it does seem that way).

I just wanted to point out to some people that this is something to consider because it could end up helping you out a lot if your income has changed.

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