Is Your IRA an IOU to the IRS?™

When you file your 2020 income taxes could either boost or lower your next stimulus payment. The IRS began accepting 2020 tax returns on February 12. But waiting to file could mean a bigger third stimulus check.

There are lots of good reasons to file your taxes early ? you?ll get your refund faster, it cuts down on identity theft, and it?s one thing of your to-do list. And for some people, it could mean a bigger stimulus check. For others, it could mean a smaller stimulus check.

So, should you file now or file later? It generally depends on whether there were any significant changes to your family or financial situation in 2020. Your next stimulus check will be based on either your 2019 tax return or your 2020 return ? whichever one was most recently filed when the IRS starts processing the third stimulus payment.

The latest estimates predict the IRS probably won?t start processing third-round stimulus checks until at least the second week of March. By then, we?ll be at least a month into tax filing season and there will be a mix of people who have filed their 2020 return by the time the IRS starts processing stimulus payments.

So, what are the things that could affect the size of your stimulus payment?

If your payment is based on a 2020 return, some of the following things could make your stimulus check higher:

  • Your income was lower in 2020;
  • You had a child in 2020;
  • You got married in 2020 (especially if there?s a wide gap between each spouse?s income); or
  • You could be claimed as a dependent on someone?s 2019 tax return, but not on anyone?s 2020 return.

However, you might want to delay filing your tax return this year if:

  • Your income was higher in 2020;
  • You had a death in the family in 2020;
  • You got divorced in 2020; or
  • You can?t claim your child as a dependent anymore starting in 2020.

Your decision on whether to file your 2020 return now or closer to the April 15th?filing deadline can potentially affect your third-round stimulus payment. If you have any questions and concerns about filing your taxes, please call our office at (435)773-9444 and schedule a time to sit down with one of our Financial Architects.


Sources:

https://www.kiplinger.com/