Filling your taxes early may positively or negatively affect your stimulus check, depending on your financial situation. Stimulus checks are financial payments made by the Internal Revenue Service (IRS), otherwise known as Economic Impact Payments (EIPs).
Before EIP payouts, the IRS does due diligence on your tax filing status, number of dependents, and adjusted growth income (AGI). Therefore, due diligence will be on your 2020 tax returns when you file early and not from the 2019 returns. If your 2020 returns depict increased incomes, your stimulus check could be lower than what you could get as EIP from the 2019 returns when you earned less income.
When should you file your tax returns (early or delayed)?
You should file early when you experience decreases in your taxable incomes in 2020, that entitles you to the full or a higher stimulus payout. When you experience something that alters your eligibility for a payout or reduces your payout amount, you probably should hold on so that your payments are computed from earlier returns.
It would be best if you were keen not to incur penalties on the late filing of tax returns. Some non-filers are entitled to stimulus payments but cannot access them until they have filed tax returns. It is the only way to claim due to EIPs and the only way that the IRS can remit future EIPs to you because they otherwise wouldn't have your information. You should also file when you are no longer claimed as a dependent.
When do stimulus checks arrive?
The IRS has already made two payments on stimulus checks totaling $412 billion to persons with annual income thresholds of $75,000 for singles and $150,000. Those who missed out or paid less than their due entitlements are entitled to claim recovery rebate credits in the third looming stimulus checks payout.
President Joe Biden's Administration intends to make EIPs worth $1.9 trillion, where $1,400 will be paid to eligible singles and $2,800 to eligible couples. Payments are made approximately six to eight weeks after-tax returns have been filed.
Is my Stimulus Check considered a Taxable Income?
Simply put, no. The IRS does not perceive refundable tax credits like EIPs to be part of taxable incomes. Stimulus payments do not increase the amount of your taxable income the next time you file your returns. It also does not amount to deductible incomes in terms of eligibility for social security benefits and programs. Neither should you worry about paying back the EIP.
What is the correlation between taxes, stimulus checks, and dependency?
Parents can claim EIPs on their children whether they are married or not. However, the loopholes for double claims are sealed by the IRS requirement that parents cannot claim on the same child but can alternate their claims. Parents who had newborn babies last year and those expecting will also receive EIPs on dependency after filing taxes and declaring these dependencies.
Whether to file your taxes early or wait for EIP to be made, this follows the consideration of how much you made in the previous last period. Where you earned more, wait for the stimulus check to be paid before filing your tax returns; otherwise you risk disqualification or a reduction in your EIP payout.