The $1.9 Trillion Covid Relief Bill (American Rescue Plan Act) appears headed to passing the House and Senate with at least the $1,400 per person direct checks to many Americans remaining in the bill. In the House version, the full payments will go to all filers with incomes under $75,000 Single and $150,000 Joint. The payments would begin phasing out at incomes above that until reaching $100,000 Single and $200,000 Joint respectively.
The Senate version lowers the eligibility numbers to $50 – 75K Single and $100 – $150K Joint. In either case eligibility will be determined by the most recent of your 2019 and 2020 Tax Returns. It recognizes that many people have not filed their 2020 returns yet.
Here in lies a planning opportunity for some people. If your income will allow you to qualify for the payment(s) in only one of those tax years, make sure that the lower income is the latest return you have filed.
In other words if you would have been eligible in 2019 but not in 2020 because your income increased, hold off filing your 2020 return. Just pay any taxes due and file an extension by April 15th. You can then file your return after the checks have been distributed, any time before October 15th.
On the other hand if your income in 2019 would have made you ineligible, but you would be eligible based on your 2020 income because your income decreased, file your 2020 return ASAP.
If you already filed, you can’t undo it, sorry.
This is a great example of how Financial Planning can benefit you. If you have any questions, don’t hesitate to reach out to us. We are happy to help.
The Bottom Line: Make sure you get your fair share.
–Michael Ross, CFP®