Q: Could the timing of when I file my 2020 tax return have an impact on the size of my next stimulus check?
A: It’s possible filing early could mean a bigger third stimulus check. But before you rush out to find a CPA or buy tax prep software, there’s another side to this story. For other people, filing early could result in a lower stimulus check.
The next stimulus payment is expected to be $1,400 to each eligible American ($2,800 for married couples filing a joint tax return), plus an additional $1,400 for each dependent in the family, regardless of the dependent’s age.
When the IRS is ready to calculate the amount of your third stimulus check, they will need to know your tax filing status, how many dependents you have, and your adjusted gross income (AGI). If you file early this year, the IRS will be able to get that information from your 2020 tax return. If you file later, that information will mostly likely be pulled from your 2019 return. Depending on your situation, that could give you an opportunity to alter the amount of your next stimulus check by timing the filing of this year’s tax return.
Under that plan, if your 2020 tax return isn’t filed and processed by the time the IRS starts processing your payment, the tax agency will use your 2019 tax return. If your 2020 return is already filed and processed, then your stimulus check will be based on your 2020 return. If your 2020 return is filed and/or processed after the IRS sends you a stimulus check, but before July 15, 2021 (or September 1 if the April 15 filing deadline is pushed back), the IRS will send you a second payment for the difference between what your payment should have been if based on your 2020 return and any payment actually sent based on your 2019 return. Although this is subject to change, that’s the plan at this point.
If you expect your third stimulus check to be higher if it’s based on your 2020 tax return (instead of your 2019 return), then you want to file your 2020 return as soon as possible. That way, there’s time for it to be processed before the IRS starts sending out stimulus payments. Some of the things that could make your stimulus check higher if it’s based on your 2020 return include:
Your income was lower in 2020;
You had a child in 2020;
You got married in 2020 (especially if there’s a wide gap between each spouse’s income); or
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You could be claimed as a dependent on someone’s 2019 tax return, but not on anyone’s 2020 return.
Rocky Mengle is tax editor at Kiplinger.com.
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