Douglas Sacha | Moment | Getty images
The timing of filing a tax return for 2020 is all the more important this year – doing it right could lead to a bigger incentive check.
The Senate this week is expected to take over President Joe Biden’s $ 1.9 trillion stimulus plan, which includes $ 1,400 in stimulus checks for Americans who receive the full amount.
So far, payments are based on the same requirements as the first two checks: The full amount goes to individuals with up to $ 75,000 in adjusted gross income and married couples filing jointly with up to $ 150,000 in income. In addition, children and dependent adults may also qualify for a check for $ 1,400.
Of course, some details could change in the coming days as the Senate considers the bill. Still, the timing of filing 2020 taxes before or after the stimulus is finally passed can make a difference in the magnitude of the stimulus check received.
When it makes sense to submit a file as soon as possible
One reason to file your 2020 tax return before the next Covid waiver bill passes is if you’ve experienced something that changed your eligibility for a payment or means you should receive a larger amount, according to certified financial planner Luis Rosa , enrolled agent and founder of Build a Better Financial Future in Henderson, Nevada.
That includes things like a fall in income between 2019 and 2020, having a baby or another child or taking care of it in your household.
If so, you can claim previous incentive payments on your tax return as a chargeback discount, and make sure you have the most current information on file for the next round, he said. This can lead to a larger tax refund or decrease the amount you may owe the IRS.
More from Invest in You:
Self-employed people are still waiting for new PPP rules
$ 1,400 Incentive Checks “This is how quickly the money could arrive
Black companies are hoping this round of PPP won’t let them down
If you are someone who has not previously had to file a tax return, you should file one this year as it is the only way to claim incentive checks you owed and to make sure the IRS has your information for any future payments.
Those who switched or moved their bank accounts in the past year may want to file their tax returns now too. As with previous incentive payments, the IRS sends all future payments first by direct deposit through the registered bank account and then by mail to the addresses they have.
If the IRS has an incorrect address or bank account for you, it can significantly delay receipt of upcoming incentive checks and possibly mean you won’t get one. If that happens, you may have to wait to claim the money on next year’s tax return.
“You can still eventually get the incentive payment on your 2021 tax return,” said Henry Grzes, chief 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 isn’t going to help you.”
When it might make sense to wait
Of course, it may make sense for some people to hold off on submitting a larger stimulus check.
Making more money in 2020 could result in you not being eligible for a payment or getting a lower amount.
That means some people want to file their tax returns after the last Covid bill is passed and every incentive goes out, so the payment is calculated based on their 2019 information. If you could fall into this category, it might be worth preparing your taxes for 2020 to see what your adjusted gross income was and compare it with the guidelines in the latest stimulus proposal, Rosa said. .
“You can prepare your tax return and not file it, so at least you know where you are,” he said, adding that if you received a payment this way, you wouldn’t be penalized later or asked by the IRS to return the money.
Certainly, delaying your tax return for 2020 means delaying the refund you owe. For some, it may not be worth waiting for after the stimulus bill has passed, Grzes said.
“You don’t want to unnecessarily delay filing your 2020 tax return, especially if you already have $ 2,000 coming to you,” he said. And if you happen to owe the IRS, you still have to pay your bill before the April 15 filing deadline or you could incur penalties.
SIGN UP: Money 101 is an 8-week learning course to financial freedom, delivered weekly to your inbox.
CHECKING OUT: Here’s the credit score you need to buy a home through Growing with acorns + CNBC.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns