Over the weekend, the U.S. Senate officially passed a coronavirus relief package based on the framework laid out by President Joe Biden. The House of Representatives already passed a version of the bill, and is expected to soon vote along party lines to pass the Senate’s updated legislation.
Once the bill is passed in the House, it’ll quickly move to Biden’s desk for his signature. The IRS will then spring into action to distribute $1,400 direct payments, which the bill authorizes for eligible Americans. These payments are available to adults, as well as to dependents — including adult dependents who were left out of the last bill.
In most cases, you will not need to do anything special in order to get the money. The IRS will use your 2020 tax return information to determine eligibility and to calculate your check — if you’ve filed a return already. Otherwise, it will use your 2019 returns.
In some cases, however, it may pay to file a return as soon as possible to make sure you get your full payment ASAP.
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Who should file a 2020 tax return ASAP to get the stimulus money?
There are a few key situations where you should act quickly to file a 2020 return before the IRS begins sending out the next stimulus check. This includes:
If your income has sharply fallen in 2020
The new stimulus bill contains stricter income limits for eligibility. Americans will receive the full amount of the stimulus payment with an income up to $75,000 for single filers and $150,000 for married joint filers.
But while the past two checks phased out at a rate of $5 per $100 earned above these thresholds (meaning people could get at least some money even with much higher incomes), eligibility for this third payment disappears entirely for single filers with $80,000 or more in income or married filers with $160,000.
If your income was above the income limits for 2019, but fell sharply in 2020 — as it did for many people due to the pandemic — you may want to file a tax return ASAP to make sure the IRS has the most recent record when calculating your payment.
If you have new dependents
If you’ve had a child or assumed responsibility for an adult dependent since filing your 2019 taxes, it’s also important to file a 2020 return ASAP to let the IRS know of your new dependents.
The $1,400 checks are available for dependents as well as for independent adult taxpayers. That means adding a child to your family should entitle you to an extra $1,400 in your bank account — as long as the IRS knows about this life event.
The COVID relief bill also provided for an expanded Child Tax Credit worth up to $3,600 for children under age six and $3,000 for older children up to age 17. The relief plan calls for the IRS to pay out half the amount of this credit into people’s bank accounts between July 2021 and December 2021. You’ll definitely want the IRS to know about your kids ASAP to get this money.
What if you don’t get your 2020 return in on time?
If your 2020 tax return isn’t filed before the IRS begins depositing the third stimulus payment into people’s bank accounts, you may get the incorrect amount of COVID-19 money — or may receive none at all.
Ultimately, you should be able to claim this money if you’re owed it. But you may have to wait a very long time. In fact, unless or until the IRS sets up a form you can complete to get the funds sooner, it’s possible you might have to wait until you can file your 2021 taxes. That would likely be January 2022, at the earliest.
Don’t take a chance of getting stuck waiting months for your money. File a return ASAP if you need to in order to get the full coronavirus stimulus money that Biden’s relief plan entitles you to.
View more information: https://www.fool.com/the-ascent/personal-finance/articles/stimulus-check-update-why-you-may-want-to-file-taxes-asap-to-get-the-correct-amount/