As reported by cnet,

Your next stimulus check could be based on either your 2019 or 2020 tax return.

Sarah Tew/CNET

The House of Representatives is now working to complete a version of President Joe Biden’s $1.9 trillion stimulus plan, which includes a third stimulus check of up to $1,400 per person, including dependents. But the current timeline for passing the bill would leave the IRS processing the next stimulus check in the middle of tax season, leaving many people with questions. 

Will the IRS use my 2019 or 2020 tax return to determine my total payment? What happens if my income has changed in the last year? And what if my third check never arrives, or money is missing? 

We’ve got answers for you based on the most recent proposal for a third stimulus check and how it will be governed. Check back often for more updates.

Why would my third stimulus check arrive during tax season?

House Speaker Nancy Pelosi said she expects Congress to have a final bill ready for Biden to sign into law by March 14, which is when some unemployment benefits expire. If Congress follows that timeline (which it may, due to a legislative tool Congressional Democrats are using to push through Republican opposition), a third stimulus check could arrive during tax season, which lasts until April 15

This makes things a bit more complicated. For one, the IRS is already including make-up stimulus money from the first two checks with your tax refund this year. It also means that the IRS will likely use whichever tax return they have on file most recently (more below). 

Now playing:
Watch this:

Stimulus check No. 3: What you need to know


Will the IRS base my third stimulus check on my 2019 or 2020 taxes?

The most recent Democratic proposal (PDF) states that the IRS would determine your total third stimulus payment based on your adjusted gross income (AGI) from either your 2020 or 2019 tax returns — whichever the IRS has most recently on file at the time of payment. 

There may be several implications to this. For example, if you earned more in 2020 than in 2019, but the IRS uses your 2019 return (and gives you more stimulus money than you might be eligible for), you won’t have to return that money (more below). 

The IRS is now accepting 2020 tax returns. We recommend filing your taxes as soon as possible for several reasons. The earlier you file your taxes, the sooner you’ll get your tax refund (you can estimate the total here) and any missing stimulus money you claimed on your return. You’ll also have a chance to set up direct deposit with the IRS, or fix any errors, which could get you your third stimulus check faster


Angela Lang/CNET

What if I made more money in 2020, but my check is based on my 2019 taxes?

The most recent proposal (PDF) says the following: 

Taxpayers receiving an advance payment that exceeds their maximum eligible credit based on 2021 tax return information will not be required to repay any amount of the payment to the Treasury. If a taxpayer’s 2021 tax credit exceeds the amount of the advance payment, taxpayers can claim the difference on their 2021 tax returns.

Therefore, for example, if you qualify for the full $1,400 based on your 2020 taxes, but the IRS issued your check based on your 2019 taxes, you could claim the difference a year from now on your 2021 tax return — much like the current Recovery Rebate Credit for missing stimulus check money from the first two rounds.

On the other hand, this also means that if you qualify for the full payment based on your 2019 taxes, but do not based on your 2020 taxes, and the IRS used your 2019 return, you will not have to pay the IRS back for that discrepancy. 

What happens if my third stimulus check doesn’t arrive, or money is missing? 

Once a final bill is approved, if you are eligible to receive a third stimulus check, but yours never arrives by direct deposit, paper check or EIP card, you’ll likely have to take another step to claim that money. This happened to millions of people during the first and second round of payments for several different reasons, including IRS errors, out-of-date banking information or addresses, or nonfilers not taking an extra step to get the IRS their information.

Much like the first and second checks, you’ll be able to claim any missing money from the third check owed to you or your dependents during tax season next year, 2022. That’s a long way away. The best thing to do right now to make sure that your third check does arrive on time is to file your tax return as soon as possible, even if you don’t usually have to do so.

For more, check out what we know so far about a third stimulus check, and who we think will be eligible this time around.

Source link: cnet


Please enter your comment!
Please enter your name here