Filing taxes early is always good, if you are expecting a refund, so that you can get it sooner rather than later. This year, however, some taxpayers may gain by delaying their tax filing. Specifically, delaying taxes this year could make some taxpayers eligible for more cash in the third round of coronavirus stimulus checks.
Income Limit Determines Your Check Amount
Most Americans would benefit by filing their 2020 return quickly, but this is not true for everyone. In fact, some might benefit by delaying their taxes. For some, filing 2020 taxes could make them ineligible for the stimulus checks, or reduce the amount they may get.
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The third round of coronavirus stimulus checks, which are yet unannounced, are part of the $1.9 trillion plan put forward by the House Budget committee last week. Congress is expected to vote on the proposal soon. If all goes as per the plan, the first checks could start going out sometime in the second week of March.
Similar to the first two rounds, the third round of stimulus checks would also have income limits. As per the proposal, the full $1,400 payment would go to those with AGI (adjusted gross income) of less than $75,000. On the other hand, those with AGI of more than $75,000 but less than $100,000 will get a reduced amount.
For married couples, the income limit is above $150,000 but under $200,000, while for Head-of-household filers the limit is higher than $112,500 but less than $150,000.
These income limits mean you won’t get any money if you are a single filer making $100,000 or more, or couples earning $200,000 or higher, or Heads of household with an income of $150,000 or more.
To determine your eligibility for the stimulus checks, the IRS would look at your most recent tax return. It is more likely that you witnessed a drop in earnings in 2020 because of the coronavirus pandemic. Thus, you might qualify for a larger stimulus check on the basis of your 2020 tax return.
However, there will be some Americans who made more money in 2020 than in 2019. It could be because of gains in the stock market, high demand for essential businesses and more. If you belong to this group, then it is recommended that you delay your tax return for a few weeks.
Suppose you’re a single filer with AGI of $74,000 in 2019, but your AGI jumped to $102,000 in 2020. If you filed your 2020 tax return early, then you may not qualify for the stimulus check at all. But, if you delay your 2020 tax return, the IRS would refer to your 2019 tax filing to determine your eligibility, and thus, you would get the full $1,400.
So, it is recommended that you hold off your 2020 tax filing until the agency sends you the stimulus payment.