Maximize Your Stimulus Payments by Carefully Timing Tax Filing
Did you make more in 2018 or 2019? That determines when you should file
The federal government is gearing up to send direct payments to Americans to help blunt the crushing economic impact of the coronavirus pandemic. Individuals will receive up to $1,200, married couples up to $2,400, with an extra $500 for each child under the age of 17.
Note those key words “up to.” How much you get depends upon how large your income was last year — or in 2018, if you haven’t yet filed your tax return for 2019. If you lost your job, switched to a lower-paying job or took unpaid time off to volunteer or recharge last year, and if you haven’t already filed your 2019 federal return, doing so immediately can get you a full stimulus payment.
Yes, the IRS extended the filing deadline by three months, to July 15. But while that may have caused you to breathe a sigh of relief and wait until summer to file, it now means that your payment will be based upon your 2018 income. And if you made more money in 2018 than you did in 2019 but haven’t yet filed your current return, you could be missing out on some stimulus money. Likewise, if you had a child last year but haven’t yet filed your return, you could miss out on the $500 child credit.
The reverse holds true as well. If you made more money last year compared to 2018 but haven’t yet filed your 2019 return, you should wait until July 15 to do so. That can get you a bigger stimulus check.
What to expect
The size of the stimulus payments varies because they start phasing out for individuals with adjusted gross income of more than $75,000, and for married couples with no children with adjusted gross income of more than $150,000. For heads of household, the benefit starts phasing out at $112,500.
For incomes that start to reach into the phase-out levels, your stimulus check is reduced by $50 for each additional $1,000 of adjusted gross income you earned, disappearing altogether once top limits are hit.
If you are an individual who made more than $99,000 last year, or a married couple with no children who made more than $198,000, you won’t get a stimulus payment. Likewise, if you are a head of household who made more than $146,500, with one child. For married couples with children, the limit is slightly higher — a family of four with adjusted gross income exceeding $218,000 gets no payment.
College-age students are largely left in the dust
The $500 per-child payment applies only to children under 17. So parents who claim college age students or high school juniors and seniors as dependents on their tax returns won’t get a payment. And because the relief package doesn’t send checks to adult dependents, millions of college students won’t get a separate payment. For divorced parents, only the parent claiming a child under 17 as the dependent can get the $500.
The payments are part of the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act, or CARES, stimulus package for individuals and businesses that have been leveled by the COVID-19 pandemic.
If you made decent money in 2019 but have since lost your job, you could still get a check.
Millions of Americans are now unemployed, and their total income this year will plummet compared with that of 2019. But that doesn’t mean they will miss out on a stimulus payment, just that they may get it next year, rather than this year.
For example, a single taxpayer with no children who made $200,000 in 2019 would not receive a payment, based upon their 2019 income, according to the Tax Foundation. But because stimulus payments are a refundable tax credit that is paid in advance, if that person makes only $35,000 in 2020, they would receive a $1,200 refundable credit on their 2020 tax return.
Also, if, despite the soaring unemployment numbers, you end up making more money this year than last year, you won’t have to pay the IRS back for any stimulus money.
Also note that Social Security recipients, who typically don’t have to file a tax return, also do not need to file a return to automatically get a $1,200 payment.
The Treasury Department has said that it expects to start sending payments in April. If the IRS has your bank account details on record, you will get the money through direct deposit. If it doesn’t, you will get a check in the mail, though that is expected to take perhaps months longer. If you have recently moved, make sure to immediately let the IRS know your correct address. You can do so here, or call your local IRS office.
You won’t have to pay taxes on the stimulus payments. If you still owe the IRS money for unpaid tax bills in prior years, that due amount won’t come out of your payment. But if you are behind on child support payments, the amount owed will come out of your stimulus check.