Many are anticipating the third round of stimulus relief from the government. It aims to help people financially during the pandemic. With this, and with tax season, people are asking questions about the filing of their tax return.
Stimulus Packages and Income
For the previous stimulus packages, the Internal Revenue Service based whether or not a U.S. citizen will receive a stimulus check and how much on income for the past year.
Currently, for the third round of the stimulus, it is expected that individuals can get up to $1,400. Meanwhile, couples can receive up to $2,800. However, the limitations and guidelines for this are still being developed.
In the previous stimulus package, however, individuals earning less than $75,000 a year or couples earning less than $150,000 would get the full stimulus package. Beyond this, they would get lesser amounts, depending on how much they have earned.
The IRS can get all the information they need to calculate how much a person can from tax returns filed by individuals. Apart from the income, they can also find out several pieces of information they may factor in during their calculation. These include the filing type, number of dependents (if there are any) and adjusted gross income (AGI).
Timing of Tax Return Filing Can Affect Stimulus Payout
The new stimulus package may likely work similarly to that of the previous ones. However, the timing of a person’s tax return filing can affect the amount that a person will receive.
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If an individual has not filed a tax return for 2020 when the IRS starts issuing stimulus checks, they will have to use your 2019 filing to calculate one’s Economic Impact Payment. But depending on a person’s situation, filing early may or may not be beneficial.
Strictly speaking in terms of the payout an individual can receive, those who get better income in 2020 may not benefit from filing their returns early. For example, if a person had a yearly income of $75,000 in 2019 but had an AGI beyond the threshold in 2020, it may be beneficial for them to wait out and not file their returns early.
Conversely, pandemic affected many people in terms of employment and income. For them, filing early may prove to be beneficial as they might have the chance to get the full check.
The new guidelines for the third round are still up in the air. So, many Americans would have to wait and see to make a decision regarding the timing of their filing.