How Filing Taxes Early Could Maximize Your Coronavirus Stimulus Check If you file taxes early, it is possible that you might get a larger coronavirus stimulus check.
This story originally appeared on ValueWalk
Filing taxes early is a good thing as it helps you get your refund sooner, if you will be getting one. This year, however, you have one more reason to file taxes early. If you file taxes early, it is possible that you might get a larger coronavirus stimulus check.
Coronavirus stimulus check: Why filing taxes early is good
If you are wondering why filing taxes early is good, it is because the amount of your check depends on your AGI (adjusted gross income) of 2019 or 2020. So, if your income reduced in 2020, which is most likely, then your third stimulus check could be of a higher amount.
Congress has still not approved the third stimulus package, but it is very likely there will be one, and that it will include stimulus checks. As per the latest proposal from House Democrats, those with income up to $75,000 (and married couples earning over $150,000) would qualify for the full $1,400 stimulus checks ($2,800 for married couples).
Related: When Is Your $1,400 Stimulus Check Coming?
On the other hand, those earning more than $75,000 would see their check amount reduced. No payment would go to those with AGI of more than $100,000 per annum. This means your latest AGI will matter a lot in deciding your stimulus check amount.
So for most people, filing 2020 taxes as soon as possible is going to be to their advantage. This year, the IRS will start accepting tax returns from February 12. Those who file their return electronically will likely have their stimulus payment based on that return.
As of now, there is no timeline of when Congress will approve the next stimulus package. However, it is largely believed the next stimulus package could be approved by mid-March. So, to maximize your stimulus check, it is recommended that you file taxes this month if possible.
Scenarios when early tax filing is good
For example, your AGI per your 2019 tax filing was $80,000, but due to the coronavirus pandemic, it went below $75,000 in 2020. If you don't file your 2020 tax return by the time the IRS processes the third stimulus checks, you will get the payment on the basis of your 2019 return.
This means you will get a check of less than $1,400. On the other hand, if you file your 2020 tax return and your AGI falls below $75,000, then you will be entitled to the full stimulus amount.
Another scenario where filing 2020 taxes could prove beneficial is if you are a single taxpayer who earned $100,000 in 2019. Based on your 2019 tax return, you wouldn't qualify for any direct payment.
However, your working hours were cut in 2020, and this reduced your AGI to $74,000. Now, you would qualify for the stimulus check of the full amount, i.e. $1,400.
On the other hand, those who believe their income increased in 2020, should not hurry to file their taxes as it could lower the amount or make them ineligible for stimulus checks.