Third stimulus check: Why some Americans should file their taxes ASAP for a bigger payment
Timing of the third stimulus check has raised new questions about tax season
Moody's Analytics chief markets economist John Lonski discusses how fiscal coronavirus relief will be difficult to reverse.
Congressional Democrats are barreling ahead with passing President Biden's nearly $2 trillion coronavirus relief package, paving the way for a third stimulus check for millions of Americans – and households could start to receive the money in just a few weeks.
But the timing of the bill's passage – lawmakers are hoping to send the legislation to Biden's desk before March 14, when unemployment benefits for millions expire – has raised new questions about tax season, like when Americans should file their 2020 returns in order to maximize their payout.
WHAT'S IN BIDEN'S $1.9T STIMULUS PLAN?
The IRS officially began accepting tax returns on Friday, Feb. 12, a few weeks later than usual to give the agency additional time to process a backlog of paper returns. The filing window closes on its customary date of April 15.
That could mean the IRS will begin distributing the latest round of cash payments in the middle of tax season, assuming that Democrats meet their self-imposed March deadline.
If taxpayers don't file their 2020 tax return before Congress passes the relief measure, the IRS will likely rely on their 2019 tax return to calculate how much money that person is owed.
But that tax return may not accurately reflect an individual's current financial situation, given that millions of Americans lost their jobs, or saw their income reduced, last year as a result of the pandemic. Filing early could help Americans who made good money in 2019 but struggled financially in 2020.
STIMULUS CHECKS AND YOUR 2020 TAXES: ALL OF YOUR QUESTIONS, ANSWERED
If your income was lower (or you lost your job), or if you had a child, got married or could no longer be claimed as a dependent last year, you should consider filing your tax return as soon as possible in order to guarantee that you receive a stimulus payment.
It's still unclear which Americans will qualify for the full $1,400.
Under the draft legislation from House Democrats, and backed by Biden, Americans earning $75,000 or less (and couples earning $150,000 or less) would receive the full $1,400 payment. But the checks would phase out faster than previous rounds, cutting off individuals who earn more than $100,000 and couples earning more than $200,000.
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The proposal also extends eligibility to more dependents, including college students and disabled adults. Dependents would be qualified to receive the full $1,400 payment, unlike the first round of checks, when children under the age of 17 were entitled to get $600, half of the $1,200 payment approved by Congress with the passage of the $2.2 trillion CARES Act.