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Lawmakers in Washington are currently taking the week off which means that we likely won’t hear a lot of news regarding the stimulus proposal until next week.
But we’ve already heard a lot of talk that the income limits for the full payments will be the same as they were for the last stimulus checks.
The only difference it seems is that the cut off for payments might be a little bit lower but we still don’t know exact specifics.
Despite that, experts are already advising a lot of people to quickly file their taxes for 2020.
This is because it is looking like the next round of stimulus checks might be authorized in the month of March — right in the middle of tax season.
If you do not file your 2020 taxes before then, then your eligibility will be based on your 2019 income.
Because many people saw their income drop during the pandemic, many will be eligible for higher payments when the third round of stimulus checks come out.
But since the IRS just started accepting returns on February 12, you can now get “ahead” of the stimulus checks and file your taxes so that you can receive the highest amount of relief possible.
Of course, the opposite is true.
If your income actually went up in 2020 then you probably want to hold off and not file until after the checks go out.
The current deadline for filing taxes is April 15 and there is a strong likelihood that if a third round of stimulus checks is authorized, it will happen before that date.
Also, if you had a child in 2020 you will likely want to file your taxes very soon so that you can take advantage of the proposed tax credit.
Depending on the terms that get passed, this tax credit could be extremely lucrative for families and possibly offer you an additional $1,400 payment for a dependent.
It’s worth noting that the IRS could implement some type of process that allows taxpayers to claim their stimulus checks before next year’s tax filing if they missed out.
This would help people who did not file their taxes before the stimulus bill but had eligible income based on their 2020 income.
There is some talk about allowing them to receive the payments sometime in the summer.
But if you really need your stimulus payment ASAP and you lost income in 2020 and/or had a child, you should seriously consider filing early.
A lot of Americans probably don’t even know that they have stimulus funds coming their way in the future.
For a lot of people, the CARES Act was a lifesaver.
It offered $1,200 in direct payments to individuals who earned less than $75,000 and up to $2,400 for those who earn below $150,000.
But there were a lot of people who did not qualify because their income was too high.
And within that group, there are a lot of people who have seen their income decrease in 2020, largely due to the economic impact of the coronavirus.
So there are lots of people who were not eligible for checks based on their prior 2018 or 2019 income but who are currently in a situation where they could use some financial relief.
Well, a lot of these people should be helped out next year when it comes to filing taxes.
This is because the stimulus payments that went out earlier this spring and that are continuing to go out are actually 2020 tax credits.
To be specific, “They’re actually an advance on a new credit on your 2020 federal income taxes,” according to Christina Taylor, head of tax operations at Credit Karma Tax.
“If you didn’t qualify for the stimulus payment based on the prior year’s income, but you do qualify for it based on your 2020 income, you can claim the stimulus payment as a credit on your 2020 tax return,” Taylor noted.
So while it may take longer to receive the benefit from the CARES stimulus package, you should be able to take advantage of some relief you may have thought you were not entitled to if your income decreased in 2020.
This also means families with children born or adopted in 2020 will get a tax credit of $500 when they file their taxes next year.
On the flipside, if your income increased this year you don’t have anything to worry about.
The IRS will not require you to repay any payments you received from the stimulus funds.
According to the IRS, “You won’t be required to repay any payment when filing your 2020 tax return even if your qualifying child turns 17 in 2020 or your adjusted gross income increases in 2020 above the thresholds listed above.”
All of this will get even more interesting when it comes to the second potential round of stimulus checks.
Because if those checks are also based on the same income reported to the IRS, this means that you could potentially receive double the credit when you file your taxes in 2020.
So I think some people will be quite surprised to see thousands of dollars in tax credits being issued come tax time in 2021.
If your income in 2020 drops compared to 2019, be sure to follow up on this to see if you are entitled to additional credits.
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Daniel Gillaspia is the Founder of UponArriving.com and creator of the credit card app, WalletFlo. He is a former attorney turned full-time credit card rewards/travel expert and has earned and redeemed millions of miles to travel the globe. Since 2014, his content has been featured in major publications such as National Geographic, Smithsonian Magazine, Forbes, CNBC, US News, and Business Insider. Find his full bio here.