“House lawmakers are set to vote Friday on President Joe Biden’s $1.9 trillion COVID-19 relief package, which includes additional $1,400 stimulus checks.”
– ABC News, February 24, 2021
Congress has President Joe Biden's pandemic rescue package moving on a fast track in a race against time to get Americans the relief they need. A key vote is expected on Friday.
CNET reports, should the COVID-19 relief package pass through the House, it would be able to make its way to the Senate. After that, all it needs is to be signed by President Biden on or before March 14th in order to get the IRS printing that third round of Uncle Sam cash.
(Claudia Dimuro. “Third stimulus checks (2/25/21): Will they come in March, what’s the latest on another IRS payment, and how much could I get?” Pennsylvania Real Time News. February 25, 2021.)
The $1.9 trillion legislation would provide not only a stimulus check of up to $1,400, extended unemployment benefits, and more funding for the COVID vaccine rollout, but also some tax relief.
You may get more of your tax dollars back from the IRS to help you pay down debt or build up your emergency fund.
Along with the much-discussed stimulus checks, additional proposals in the bill would offer the average household $3,100 in tax savings for 2021, according to the Urban-Brookings Tax Policy Center. When you file your taxes, the credits give you a dollar-for-dollar reduction in how much you owe in income taxes.
Families would see tax savings from four major provisions:
A $1,400 stimulus check, which is actually just an advance on a tax credit.
An expanded earned income tax credit.
An expanded child tax credit.
A bigger credit for those paying for child care.
Plus, some of those credits would be refundable for 2021. This means if your tax liability drops to zero, the IRS will send you a refund for a set amount — putting money directly back in your pocket.
Who would benefit from the tax savings?
Two-thirds of the tax savings will go to households earning less than $91,000 a year, according to the tax center’s analysis. That’s not to say higher-income households won’t also receive some relief: About 11% of the proposed benefits will go to families making more than $164,000.
Under the plan, the child tax credit not only gets a boost, but it also becomes refundable — meaning families would receive even more money. Low-income parents would be able to claim $3,600 (up from $2,000) for children under the age of 6 and $3,000 for children under 18.
Nearly 80% of those expanded benefits will go to low- to moderate-income families, according to the tax center’s analysis. The proposed changes to the child tax credit would help lift 11 million children out of poverty, says the Center for American Progress.
As for the earned income tax credit, the boost included in the bill would nearly triple the maximum credit for workers without children and extend eligibility to more people.
(Sigrid Forberg. “Biden's stimulus checks bill could cut your taxes by $3,100.” Yahoo Finance. February 25, 2021.)
If approved, the checks could go out as soon as next month. Extra federal unemployment benefits that have been in effect for months are due to expire on March 14. They must be extended, then, by March 13, and since that is expected to be taken care of as part of the enormous piece of legislation that would include a third stimulus payment to millions of eligible Americans, that is the deadline for the legislature and Biden to agree on whatever other elements of the package they must before it is signed, sealed, and delivered.
If approved by early-to-mid March, it should not take long for the IRS to start sending either checks, direct deposit payments, or prepaid debit cards out to anyone who qualifies, seeing that they’ve done it twice already. Most projections say it would take three days to a week to get going once Biden signs the bill, which will have a price tag that, at minimum, reaches the hundreds of millions and perhaps goes as high as $1.9 trillion. That means money could be in your pocket by the end of this year’s third month, and certainly by early April at worst.
What about filing your taxes as it relates to the third stimulus check? Kiplinger offers some good advice and even posts a “Third Stimulus Check Calculator” online. Here are some considerations (much more is available at https://www.kiplinger.com/taxes/tax-filing/602244/how-filing-your-tax-return-early-or-late-could-boost-your-third-stimulus-check.)
Filing your tax return earlier could mean a bigger third stimulus check. But before you do, there's another side to this story. For other people, filing early could result in a lower stimulus check– and you don't want that.
So, should you file early or file later? Which camp you're in generally depends on whether there were any significant changes to your family or financial situation last year. That's because your next stimulus check is likely to be based on either your 2019 tax return or your 2020 return – whichever one was most recently filed when the IRS starts processing your next stimulus payment.
If you expect your third stimulus check to be higher if it's based on your 2020 tax return (instead of your 2109 return), then you want to file your 2020 return as soon as possible. (Use our (Kiplinger) calculator to run the numbers – https://my.kiplinger.com/kiplinger-tools/taxes/third-stimulus-check-calculator/index.php?_ga=2.199776747.475584824.1614280443-1577946394.1614280443
That way, there's time for it to be processed before the IRS starts sending out stimulus payments. Some of the things that could make your stimulus check higher if it's based on your 2020 return include:
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.
(Rocky Mengle. “How Filing Your Tax Return Early (or Late) Could Boost Your Third Stimulus Check.” Kiplinger. February 18, 2021.)
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