Some Words About the Latest Stimulus Payment (Part 2)
In last week’s post I wrote about the latest stimulus payment. Eligibility is based on your income as reflected on your income tax return. What happens if you have not filed your 2020 income tax return? The IRS will use your 2019 income tax return in that case to determine qualification. And what happens if you have lower income in 2020 than you did in 2019 which would allow you to qualify for the payment (or a higher payment)? One option is to quickly file a 2020 return.
Even if you don’t file before you receive your stimulus check, you can still file later and the IRS will make the adjustment after reviewing the 2020 return and send any additional amount you are entitled to.
If it turns out that 2020 income is greater than 2019 such that you would not have been eligible or you would have been entitled to less of a payment there is no provision in the law to allow the IRS to take back the money. So it might be better to wait to file a 2020 tax return if you believe you won’t get a payment (or not as much of a payment) based on 2020 income. Keep in mind that the deadline for most Americans to file a federal income tax return has been extended to May 17 (except for residents of Louisiana, Texas and Oklahoma where it is June 15).
A final note on income. If your 2021 income turns out to be lower and would have permitted you to receive a larger stimulus payment, when you file that return next year you can claim that additional amount. In that case you would either get the payment in the form of a tax refund or it could reduce your overall tax liability.