Coronavirus Stimulus: Why it May Pay to Wait on Filing your 2019 Tax Return
Written by David S. Hansen
If you are about to file your 2019 tax return, STOP, and read this first. Filing early could cost you thousands of dollars.
As you may be aware, the Senate yesterday unanimously passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) that gives cash payments out to most Americans. If it passes in the house and is signed by the president, as expected, then your cash payment eligibility may vary depending on whether your most recently filed tax return is from 2018 or 2019 when the IRS makes its distributions.
The IRS will automatically calculate and send these payments to you either via direct deposit or check and it is expected to send them out in April. The amount is based on your adjusted gross income reported on your most recently filed tax return. Individuals earning up to $75,000 a year will be eligible for the full $1,200 check. Smaller checks will go out to individuals making up to $99,000 a year (with payment amounts falling by $5 for every $100 in income above $75,000). Married couples are eligible for a $2,400 check as long as their adjusted gross income is under $150,000 a year. Reduced checks, on a sliding scale similar to the individual scale, will go out to married couples who earn up to $198,000.
The checks are expected to go out within the next two to three weeks, but may take longer.
Due to the fact that the payment is based on your most recently filed tax return, you need to carefully consider your income this year as compared to the last. If you made less in 2018 than you did in 2019, you might be well served by delaying the filing of your 2019 tax return until you receive the stimulus payment. Conversely, if you made less in 2019 than 2018, you will want to file your return ASAP. If for both 2018 and 2019 you made more than $99,000 (individually) or $198,000 (married) or if for both 2018 and 2019 you made less than $75,000 (individually) or $150,000 (married) then your stimulus payment will generally be unaffected by which year you choose to file (but see the note further below)
Note, Under guidance from March 18th, only the payment deadline (not filing deadline) was extended to July 15th. However, under new guidance (https://www.irs.gov/pub/irs-drop/n-20-18.pdf) the filing deadline has also been extended to July 15th. That gives you more flexibility in deciding when to file.
Note Further: If you are under the applicable thresholds and had a child in 2019, you will want to file the application AS SOON AS POSSIBLE, because you will also get a $500 per child that you will miss out on if the IRS uses your 2018 return to send a check.
©ScottHulse, P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between ScottHulse and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.
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