With Congress still negotiating a third round of stimulus payments, you should carefully consider when to file your taxes this tax season. Tax season begins February 12th and ends April 15th. Filing your taxes earlier or later within that time period may determine whether or not you receive the third stimulus payment and how much that you receive.
The third stimulus payment is again expected to be capped at certain income levels. The current proposal is $1,400 payments to individuals earning up to $75,000 per year and married couples earning up to $150,000 per year. Individuals earning more than $100,000 and married couples earning more than $200,000 are completely phased out under the proposal. One big change from the last two rounds of stimulus payments is that the proposal makes adult dependents eligible for payments.
The proposal calls for your income to be determined by the adjusted gross income on your most recently filed tax return. If you have not yet filed your 2020 taxes, the government will use your 2019 income. However, if you have already filed your 2020 taxes, the government will use your 2020 income.
If your income is less in 2020 than it was in 2019, you may want to file your return sooner to have a better chance of being eligible for the next stimulus payment or getting a larger payment amount. If you took a big hit to your income in 2020, for example, if you lost your job or had your salary reduced, the government will not take that into account unless you show it on a 2020 tax return. If your income is higher in 2020 than it was in 2019, you may want to hold off on filing your 2020 tax return until income caps are finalized because filing the return may reduce the amount of your stimulus payment. Lawmakers have indicated that they would like to get a relief package passed by March 14, when the supplemental unemployment benefits are scheduled to end. When consulting a tax preparer this year, you should discuss the timing of filing your return.