tax tips — February 23, 2021

Why a Third Stimulus Bill Could Make Early Tax Filing an Even Better Idea

by Susannah McQuitty

The third stimulus payment could be boosted by filing your taxes in February or March.

Filing your taxes early is always a great idea—it’s one of the easiest ways to keep your tax refund safe and even get it faster—but this year, filing in February or early March could be even better for your finances. That’s because of the third stimulus bill, which is still being ironed out in Congress, and the fact that it is expected to pass in mid-March.

So what does COVID-19 relief have to do with filing your taxes early?

Could my 2020 tax return get me a bigger stimulus check?

Absolutely—since the IRS uses the latest information on file for you (usually in the form of your most recently filed tax return), updating that info could boost your stimulus payment if your situation qualifies.

For instance, taxpayers with children born during 2020 would get an additional payment (the amount is yet to be seen) for that child or children. If the most recent tax return on file for those taxpayers is 2019, however, the IRS won’t know about the new kiddos and wouldn’t send the extra payments.

Another example is if your 2019 income places you above the income threshold (which hasn’t been established yet) for EIP3. If your income is greater than the payment threshold, you wouldn’t get anything. However, your 2020 income may be less than that threshold due to job loss, fewer hours, or fewer paying customers—so you would actually qualify for EIP3 if you file your 2020 tax return before the payment is calculated.

Could filing early disqualify me for the next stimulus payment?

That’s a fair question—until we see what the package has for sure, it’s hard to say, but there may be some situations where you’d be disqualified for a third stimulus payment.

For example, if your 2019 income ends up being in the EIP3-eligible income range, but you made more than the eligible threshold in 2020, then filing early would prevent you from getting that payment. That’s not a bad problem to have—after all, being above the threshold means you don’t need the assistance (at least according to the government’s standards).

Another situation could be if you claimed a child in 2019 but that dependent is now on his own. You wouldn’t get any additional payment for the dependent—but your child would receive the EIP3 if they have filed their return in 2020, which hopefully means less money out of your pockets in the long run.

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