Why you might want to file your taxes now to get a $1,400 stimulus check
Can filing your taxes early get you a bigger stimulus check? Quite possibly.
On Saturday, the House passed a $1.9 trillion stimulus bill aimed at getting Americans another injection of aid to help them through the pandemic—which includes a $1,400 stimulus check. Though the bill has yet to be passed in the Senate, Democratic leadership has set a March 14 deadline—right in the middle of tax season—to get the bill on President Joe Biden’s desk.
But for those who haven’t filed their taxes yet, there’s an important thing to note: Stimulus checks in 2020 were based on filers’ most recent tax return on file with the IRS, either 2019 or 2018. In this new bill, the checks would also be based on the most recent return: either 2019 or 2020.
That means the decision to submit your 2020 tax return early could determine whether or not you’ll get a $1,400 stimulus check—depending on whether you made more or less money in 2020. For that reason, tax payers whose incomes fell in 2020 would be incentivized to file their taxes before the relief package passes.
Indeed, that’s what Sen. Ron Wyden suggested last month in a tweet: “Tax filing season starts February 12. By filing your taxes early, you’ll ensure your next relief payment will be based off of your most recent income. If you lost wages in 2020 as a result of this pandemic, file your taxes ASAP to ensure you get the help you need.”
On the other hand, tax payers who made more money in 2020 might want to delay filing so the government could use their 2019 tax information to determine eligibility.
Still, Andy Phillips, a director at the Tax Institute at H&R Block, says “in the vast majority of cases, it’s probably still in your best interest to go ahead and file. If you’re waiting on a tax refund and you need that money, you don’t want to delay filing in hopes of some potential future legislation,” he recently told Fortune. But he notes that if you are certain your financial situation in 2019 would exclude you from getting a round of payments and that you would qualify based on how much you earned in 2020, “that’s just one more catalyst to go ahead and file.”
Filing your taxes now, or holding off, matters if you lost or gained income that would put you above or below the income thresholds set by Congress to qualify, or if you had a child during 2020 that would not be reflected in your 2019 tax returns. The bill passed through the House would send $1,400 checks to single filers making $75,000 per year or less, and $2,800 checks to couples filing jointly making $150,000 or less. Higher earners would see their checks reduced, with singles making over $100,000 and joint incomes above $200,000 not receiving a stimulus check at all.
However, those income cutoffs are still up in the air. On Wednesday, President Biden backed a Democratic proposal to lower the cutoffs for income eligibility. That proposal, which was pushed by some moderate Democrats, would make single filers earning over $80,000 ineligible for a check. It would also exclude couples filing jointly with incomes above $160,000.
Like the two rounds passed in 2020, these checks would be based off of your adjusted gross income (AGI).