File Your Taxes Early for a Bigger Stimulus Check
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What is the main topic discussed in this episode?
Here's your money briefing for Tuesday, February 9th. I'm J.R. Whelan for The Wall Street Journal. Many Americans saw their incomes drop in 2020. If that applies to you, filing your tax returns before the IRS sends out stimulus checks could mean a bigger check than in the past.
Tax filing opens February 12th, this coming Friday, and the IRS has nothing from anyone on 2020. And so if you want your check based on 2020, you might have an incentive to file your tax return pretty quickly after February 12th.
Tax reporter Richard Rubin will explain who could benefit from getting their tax documents together ASAP. That's after the break.
The stimulus checks that were sent out last year were based on tax returns from 2018 or 2019.
How could filing 2020 taxes before the IRS sends payments increase my stimulus check?
That means that some Americans who lost their jobs or had to go on furlough in 2020 may not have gotten the full aid. Now there could be a new round of stimulus checks and it's almost tax season. So what's the best plan? Richard Rubin's been our point person on stimulus and taxes and he joins me now. Richard, thanks for being with us. Oh, happy to be here. So Richard, before we get into how to best navigate this, we should note that the next round of stimulus hasn't even been approved yet.
Right.
Who should rush to file taxes early because of income or family changes?
Congress hasn't released all the final details. They're still working out exactly what those details are going to be, and then they've got to get it through the House and the Senate. So we're definitely a couple weeks away from the final approval, the president's signature, and the money going out.
Okay, so let's assume there are stimulus checks.
How will Congress likely instruct the IRS to choose between 2019 and 2020 income?
Who should be rushing to file their taxes earlier rather than later?
This only applies to some people, really people who've had big shifts in their income or in their family structure between 2019 and 2020.
Can missed stimulus be claimed later on tax returns or topped up midyear?
Here's what's likely to happen. Congress is likely to tell the IRS to base the next set of checks on 2019 or 2020 income. from your tax return, whatever the IRS has. So tax filing opens February 12th, this coming Friday, and the IRS has nothing from anyone on 2020. And so if you want your check based on 2020, you might have an incentive to file your tax return pretty quickly after February 12th so that while Congress is finishing the bill, the IRS is processing your information and knows how much you made in 2020.
So, no procrastinating this year?
What are the pros and cons of filing early versus waiting for 2019 data?
Is that it?
Yes. If you would do better under the 2020 income, say you made $150,000 in 2019, so you wouldn't get any check based on that, but you made $50,000 in 2020 and you would get the full check based on that, then absolutely you're going to want to not be a procrastinator. There's a flip side to that, which is that households that moved in the opposite direction, that for whatever reason had their income go up in 2021,
What happens if I get more or less stimulus than I ultimately qualify for?
or had their family size change in a way where they would have qualified for less money, might want to wait so that the IRS is basing the amount on 2019. You know, it's really worth waiting at some level to see those details as they start coming out. But if you're in that group that might want to file early, you should at least be prepared to do that. This isn't for everyone. This is, you know, if your income was, you know, well within the range of what's going to qualify for a full check, if you made... $35,000 in 2019 and $45,000 in 2020, then you would get the full amount no matter what and you're fine. It's really for people who have had those big shifts, which of course is a lot of people who had really rough 2020s and saw their incomes go down.
Now, if people don't file fast enough, will there be a provision where their stimulus amount could be bumped up later?
So let's back up and try and unpack this a little bit because it's a little tricky. So for the first two rounds, the ones that were paid in March and December of 2020, those were based on 2018 or 2019 income. And if you didn't get the full amount... Then when you're filing your 2020 return this year, you can use your 2020 income and claim it as what's called the recovery rebate credit on line 30 of your tax return.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–0:58
2
How could filing 2020 taxes before the IRS sends payments increase my stimulus check?
0:58–1:24
3
Who should rush to file taxes early because of income or family changes?
1:24–1:42
4
How will Congress likely instruct the IRS to choose between 2019 and 2020 income?
1:42–1:55
5
Can missed stimulus be claimed later on tax returns or topped up midyear?
1:55–2:34
6
What are the pros and cons of filing early versus waiting for 2019 data?
2:34–2:59
7
What happens if I get more or less stimulus than I ultimately qualify for?
2:59–5:53
Speakers
2 identifiedMore from WSJ Your Money Briefing
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