The IRS could base your next stimulus check on either your 2019 or 2020 tax return.
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In an attempt to finalize President Joe Biden’s $1.9 trillion stimulus package by the middle of March, the House Budget Committee is set to begin marking up the proposal on Monday, Feb. 22. That timeline tracks with the third stimulus check of up to $1,400 per person arriving for eligible individuals and families right in the middle of tax season. That means, just as the IRS is processing 2020 federal tax returns, it would also start sending out the next round of stimulus checks.
This may leave you wondering: When should I file my taxes? Will the IRS use my 2019 or 2020 tax return to determine my new stimulus payment? What happens if I don’t file in time? Will this change my eligibility? And what if my third check never arrives, or the amount is incorrect?
We’ve got answers for you based on what we know from the most recent proposal for a third stimulus check. We won’t know anything for sure, however, until we can read the final language in a new bill. We’ll continue to update this story.
Why your third stimulus check could arrive during tax season
House Speaker Nancy Pelosi said she expects Congress to have a final bill ready for Biden to sign into law by March 14, which is when some unemployment benefits expire. If Congress follows that timeline (which it may, due to a legislative tool Congressional Democrats are using to push through Republican opposition), a third stimulus check could arrive during tax season, which has begun already and lasts through April 15.
This makes things a bit more complicated. For one, the IRS is already including makeup stimulus money from the first two checks with your tax refund this year. It also means the IRS will likely use whichever tax return they have on file most recently (more below.)
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Stimulus check No. 3: What you need to know
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Will the third stimulus check be based on 2019 or 2020 taxes?
The most recent Democratic proposal (PDF) states the IRS would determine your total third stimulus payment based on your adjusted gross income, or AGI, from either your 2020 or 2019 tax returns — whichever the IRS has most recently on file at the time of payment.
There may be several implications to this. For example, if you earned more in 2020 than in 2019, but the IRS uses your 2019 return (and gives you more stimulus money than you might be eligible for), you won’t have to return that money (more below).
The IRS is now accepting 2020 tax returns. We recommend filing your taxes as soon as possible for several reasons. The earlier you file, the sooner you’ll get your tax refund (you can estimate the total here) and any missing stimulus money you claimed on your return. You’ll also have a chance to set up direct deposit with the IRS, or fix any errors, which could get your third stimulus check to you faster.
With tax returns and third stimulus checks potentially occurring at the same time, the IRS could have its hands full.
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What’s the situation if you made more money in 2020, but the third check is based on your 2019 taxes?
The most recent proposal says the following:
Taxpayers receiving an advance payment that exceeds their maximum eligible credit based on 2021 tax return information will not be required to repay any amount of the payment to the Treasury. If a taxpayer’s 2021 tax credit exceeds the amount of the advance payment, taxpayers can claim the difference on their 2021 tax returns.
Therefore, if you qualify for the full $1,400 based on your 2020 taxes, but the IRS issued your check based on your 2019 taxes, you could claim the difference a year from now on your 2021 tax return — much like the current Recovery Rebate Credit for missing stimulus check money from the first two rounds.
On the other hand, this also means that if you qualify for the full stimulus payment based on your 2019 taxes, but do not qualify based on your 2020 taxes, and if the IRS used your 2019 return, you won’t have to pay the IRS back for that discrepancy.
What happens if your third stimulus check never arrives, or if any money is missing?
Once a final bill is approved, if you’re eligible to receive a third stimulus check, but yours never arrives by direct deposit, paper check or EIP card, you’ll likely have to take another step to claim that money. This happened to millions of people during the first and second round of payments for several different reasons, including IRS errors, out-of-date banking information or addresses and nonfilers not taking an extra step to get the IRS their information.
Much like with the first and second checks, you’ll be able to claim any missing money from the third check owed to you or your dependents during tax season next year, 2022. That’s a long way away. The best thing to do right now to make sure your third check does arrive on time is to file your tax return as soon as possible, even if you don’t usually have to file one.
For more, check out what we know so far about a third stimulus check and who we think will be eligible this time around.