Why Your Third Stimulus Check Could Be Bigger If You File Your 2020 Income Tax Return Early

The Senate approved a budget resolution Friday morning that will allow President Joe Biden’s $ 1.9 trillion stimulus bill to pass without Republican support. But lawmakers have agreed to restrict high earners from receiving the third stimulus check to a maximum of $ 1,400, and have indicated that eligibility rules may be stricter than past direct payments.

The Internal Revenue Service (IRS) will likely determine eligibility for checks and amounts to be distributed based on people’s latest tax returns. Taxpayers must file their personal return for 2020 by April 15, but those who saw their income drop last year due to the ongoing coronavirus pandemic might want to do so early to get a bigger check. Conversely, those who saw their income increase in 2020 could receive a higher payment if they wait and deposit their checks after the checks are distributed.

According to the Senate Finance Committee, Congress should order trustees to use the last recorded individual income – either 2019 or 2020 – when the checks are ready for distribution. The IRS will begin receiving tax returns on February 12, and people who deposit before the checks are released will receive an amount based on their 2020 tax return. Those who file after the payment has been distributed will receive an amount based on their 2019 tax return.

As part of Biden’s US bailout, people earning more than $ 75,000 will receive a reduced payout and higher wage earners could be cut out altogether. The Senate recently overwhelmingly approved a bipartisan amendment proposal, led by Senators Joe Manchin of West Virginia and Susan Collins of Maine, to prevent “high income taxpayers” from receiving the payments.

Americans will likely have to file their 2020 tax returns in the coming weeks to take advantage of the opportunity to use their last income for the third stimulus check. The Senate backed Biden’s $ 1.9 trillion stimulus package on Friday, with Vice President Kamala Harris voting for a budget reconciliation. This will allow Democrats to quickly pass the measure without Republican support.

Congress will now have to approve the amendments to deliver the package, and Pelosi has said the legislation will “absolutely” be passed before March 14 – an unofficial deadline set by Democratic lawmakers to approve further aid.

Pelosi explained on Friday that the party “would start working on the details of the bill” on Monday. “Hopefully in two weeks we will send something to the Senate and it will be done well before the initiatives expire,” the Speaker said, adding that Congress “would complete our work before the end of February” .

The IRS will begin processing the payments shortly after Biden signs the package. It is currently not clear whether Congress will order the IRS to reimburse the difference for those who receive payments based on their 2019 income, but are eligible to receive more money based on their 2020 income. .

David Kautter, who was one of the Treasury Department’s top tax officials during last year’s stimulus check payments, said The the Wall Street newspaper that the IRS could complete the payments after receiving the 2020 returns. But Kautter noted that the process could be delayed until after the tax filing period.

Newsweek contacted the Treasury Department for comment.