How Can I Qualify for That $1,400 Stimulus Check?
(Bloomberg) -- President Joe Biden signed into law a third round of direct stimulus transfers in less than a year, meaning that most Americans can expect another cash infusion in the coming weeks. The Internal Revenue Service has begun sending more than $410 billion in payments to low- and middle-income households, the largest batch of direct household assistance yet during the pandemic. Democrats say that these $1,400 checks, combined with $600 approved in December, fulfill a pledge made late last year to send $2,000 to American households. The hope is that the payments can help families cover costs while hundreds of millions of people wait to be vaccinated and return to more normal daily routines.
1. Who will get checks, and for how much?
Individuals who earn as much as $75,000, or couples making $150,000, plus their children or adult dependents, qualify for the full $1,400 per person. Single parents with at least one dependent who earn $112,500 or less also get the full amount. Families in which some members have different citizenship and immigration classifications are also eligible for a payment, if at least one person has a Social Security number. The payments phase out much more quickly than in previous rounds: An individual with income of $80,000, or a couple with $160,000, get nothing. That’s the result of a last-minute compromise to maintain the support of moderate Democrats who wanted to more narrowly target the money.
2. How will the IRS determine my income?
It will use the most recent adjusted gross income in its system. So if you’ve already filed a tax return with 2020 income, that will likely be used. If you file in the coming weeks and qualify for more money, the IRS is watching the incoming tax filings and could top off your payment once you submit your return. If you are waiting a bit longer to file your taxes this year, the agency will rely on your 2019 income. However, the payment is technically based on the income you earn in 2021, which isn’t yet known. If you earn less this year than in prior years, you can claim any missing payments on the tax return you file next year. But good news: If you earn more this year and would qualify for a smaller payment or no payment at all, you won’t have to send the money back.
3. Should I wait to file my 2020 tax return?
If you qualify for a bigger stimulus check based on your 2019 income, compared to your 2020 earnings, it’s fine to wait to file. Just be sure that you submit all your paperwork and any taxes due by April 15 to avoid penalties and fees. There are also legal ways to reduce your adjusted gross income if your income is likely to land just slightly above the qualification thresholds. Contributing more to tax-favored retirement or health savings accounts or deferring income, such as waiting to sell a business stake or some stock, could keep your income within the limit to qualify for the payment.
4. When and how will I get the check?
The IRS began processing the first batch of payments March 12 and will continue to send payments out in waves in the following weeks. Individuals getting their payment via direct deposit transfer will likely see their money show up more quickly than those getting it through the mail. However, direct deposit payments could appear as a “pending” transfer for a few days before the money can be withdrawn. The IRS says that the first round of paper checks and prepaid debit cards will begin showing up in the mail before the end of March. Social Security and other federal beneficiaries will receive their $1,400 the way they normally get their monthly transfers, but the IRS has not yet set a date for when those payments will be made.
5. What if I’m still waiting for my round one or round two payment?
The IRS has added an extra line -- line 30, “Recovery rebate credit” -- to this year’s individual tax return Form 1040 to claim any missing payments. If you are missing some or all of those payments you can claim the additional amount and it will be added onto your tax refund.
6. Are there any other tax changes in this stimulus bill?
The legislation expands the child tax credit for one year to $3,600 for children under 6, and to $3,000 for children ages 6 to 17. The current credit is $2,000 per child. The IRS will start sending the credit in advance to households in the form of monthly payments. The legislation would also make up to $10,200 of unemployment benefits tax-free for those in households earning no more than $150,000, a change that would save many people from facing surprise tax bills on jobless benefits.
The Reference Shelf
- The IRS has answers to many questions at the Economic Impact Payment Information Center.
- A snappy summary of what’s in the Senate version of the $1.9 trillion stimulus bill.
- Retailers and restaurants could be the winners of stimulus spending, according to Bloomberg Intelligence.
- A Bloomberg Quicktake video explores the tax differences between unemployment benefits and stimulus checks.
- Consumers in the largest economies amassed $2.9 trillion in extra savings during the global lockdown.
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