Free Money Coming Up
The latest payments are $1,400 per household member, including adults, children and adult dependents provided you are under the cutoffs.
However, there are some interesting tactics you can take to get money faster and stay under the cutoff threshold via delayed filing.
Please consider the WSJ article Who Will Get a $1,400 Payment?
How big are the payments?
The latest payments are $1,400 per household member, including adults, children and adult dependents such as college students and elderly relatives. Adult dependents were ineligible for prior rounds of payments.
Who is eligible for the stimulus checks?
Yes. Individuals with adjusted gross income up to $75,000, heads of household with AGI up to $112,500 and married couples with AGI up to $150,000 will get the full payments. Above that, the payments phase out.
What information will the IRS use to determine the size of payments?
The government will use the information it has on file from the 2020 tax return if that has been processed. It will use information from the 2019 tax return if that is the only one available to the government.
What if I qualify based on 2019 income but not on 2020 income? Can I just wait to file my tax return?
Yes. The IRS will issue payments based on 2019 data if it doesn’t have 2020 information. And the bill specifically doesn’t allow the government to take back any such payment. The payments are also not taxable income.
Strange Numbers
The numbers can get strange for some households. For example, a married couple with four children that made $160,000 in 2019 and 2020 would get no payments now. But if the same couple makes only $150,000 in 2021, it would get $8,400 on its 2021 tax return that would either shrink the taxes it owes or increase its tax refund. In addition, the couple would also get a larger child tax credit and $2,200 in income-tax savings.
Here’s What to Do
- If you made more than the cutoff in 2020 but not 2019, delay your tax return. File an extension if necessary.
- If you made more than the cutoff in 2019 but not in 2020, file pronto to get your money sooner.
- If you are just over the cutoff in both years and can get under it in 2020 by making an IRA contribution or other means, do so.
- If you have a business and are near the cutoff look for legal ways to defer income until next year or depreciate more items this year.
- If you already filed but have a way to file an amended return to get under the cutoff, then do so.
That represents what passed in the Senate. It is remotely possible for the House to amend the bill and it would return to the Senate where literally anything could happen.
However, Biden has urged passage as is and that is widely expected.
Mish
Yes you are correct and it happened to me last year. My 2018 income qualified but my 2019 didn’t qualify. My 2020 income would qualify. I waited to file my 2019 return, I got paid for myself, wife, and son who in 2018 was a 16 year old “child” but in 2019 would just be a dependent and not qualify. Then my son got a check because he was getting social security due to my drawing social security and him being qualified for dependent social security. My mother who passed away in January 2019 didn’t qualify due to 2018 income being too high but as soon as I sent in her 2019 final return I got a direct deposit to her named, “DECD” (deceased). After I filed my 2019 return I didn’t get the second payment (income too high) but when I filed my 2020 taxes I qualified and got the rebate. My son also got the second payment (I assume due to his previous social security payments) even though he was no longer getting payments due to graduating from high school. My deceased mother didn’t get the second payment. I am wondering what will happen with this third (or first Biden) payment. I am not against helping people in this weird situation but I think that it should be targeted to those who lost income in 2020 and whose income are below certain thresholds. Spraying out money doesn’t help and will hurt when the party is over.
No way I could qualify for the $1400…but glad to have the PPP-2 socked away to help with payroll. Hopefully we get back to something like normal before the year is over.
I don’t have a handle on 2020 taxes. I paid quarterlies at the 2019 level, so I should get a substantial refund or have a large overpayment to carry forward..but I’m not exactly sure how bad “bad” was…..yet. The second and third quarters were pretty bad. I have yet to see the last quarter numbers.
If the banks are getting free money, why not some for the people. It is all the same money anyway.
… but this doesn’t make you a welfare queen or anything…
“…or depreciate more items this year” haha.
That is what the WSJ said
i doubt it. tax law doesn’t usually work that way. anyone following this advice in search of free money better speak to an accountant first
If it was written into the bill, IRS has no say.
Are you sure you would not be legally liable to return the funds later?
Thank you Mish! Didn’t know the dropoff was so steep. Basically $150k AGI, full amount and $160k AGI is $0. Contributing the max to my HSA and filing an amended 2020 tax return (hopefully that works).
This is exactly what we are going to be doing.