CLEVELAND — Each year, there are many people who file their taxes as soon as possible to get ahold of refund checks early if the IRS owes them money, but filing your taxes early or late this year can change the amount of your future stimulus check if your income changed from 2019 to 2020.
"You want to make sure when you’re filing your income taxes that you plan ahead," Chris Kichurchak, President of Independence Wealth Advisors, told 3News. "Tax planning is really a year-round process."
The IRS officially begins accepting 2020 taxes on Friday. That’s later than usual as there are new tax rules surrounding the pandemic, and since your income is used to determine your stimulus check amount, when you file is important.
While President Joe Biden and Democrats are pushing for a third round of COVID-19 stimulus checks, it has not yet been approved by Congress. That’s a process that some politicians have said will happen by mid-March.
The first two stimulus checks issued in April and December used the latest tax info available to the IRS. Here’s why that matters: A future stimulus issued in March would likely use 2019 income data, but could also use the 2020 tax data if you've filed that information before checks are issued.
To maximize your stimulus amount, it may be beneficial to file later, depending on your situation.
"If you made more money in 2020 than you did in 2019, you may want to delay it until they issue the third stimulus check round so you can make sure you get your benefits as well," Kichurchak explained.
Put simply, if you made more money in 2020, you may want to file later so the IRS uses your lower 2019 income to determine your stimulus check amount. If you made less money in 2020 than 2019, file now so the IRS has your latest, lower income data when calculating your stimulus.
It’s a situation tax experts advise you to take advantage of, assuming the rules don't change later.
"We want to make sure we use these tax laws and pay as little taxes as we can legally," Kichurchak said.
It's a loophole that some in Congress have taken note of. Rep. Alexander Ocasio-Cortez recently tweeted, "The pandemic hit in 2020. We should not use 2019 income to determine relief eligibility."
There are also proposals to lower the income threshold for future payouts from $75,000 to $50,000 for individuals (double those numbers for married couples), which could also affect relief eligibility.
The 2020 tax laws are enough to confuse anyone. Some examples? Many have received unusual forms related to unemployment, and others will need to file for the Recovery Rebate Credit because they never received the first stimulus checks due to them. For that reason, it’s important to contact a professional to find out what is the best option for you.
"Consult a professional tax advisor this year, a CPA, because there are so many changes that have been made," Kichurchak advised.