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Compare COVID payments using 2019 or 2018 tax return

Coronavirus COVID-19

The law that created coronavirus stimulus payments just took effect yesterday and we're weeks at best from getting actual money. But tax planners have been thinking about COVID-19 tax intricacies since the illness exploded in the middle of this tax season.

These payments just add a new tax filing wrinkle, since what we put on our 2019 returns could be a key part in the relief amount's ultimate dollar calculation.

Tony Nitti, a CPA and tax partner with RubinBrown in Aspen, Colorado, has a good preview of what our tax filing actions now could mean to our potential coronavirus payments in his Forbes' piece When You File Your 2019 Tax Return Will Impact Your Stimulus Payment

It's not as simple, Nitti notes in this this weekend's first Saturday Shout Out, as sending in a 2019 Form 1040 as soon as possible.

Prior filings determine relief amount: Yes, the new Coronavirus Aid, Relief and Economic Security (CARES) Act calls for the Internal Revenue Service to first look at our 2019 tax returns to compute the payment. But if you haven't filed, notes Nitti, the IRS will grab your 2018 return instead.

"This, of course, presents opportunity," writes Nitti. "An individual who has not yet prepared his or her 2019 return should take into account the relevant variables — adjusted gross income, marital status, number of children — and determine which year would yield the bigger payment. If it's 2019, then you'd better hurry up and file; if it's 2018, then hold that 2019 return back until you receive your payment."

He offers several examples in his article to illustrate how the differences in the 2018 and 2019 return information could impact your eventual COVID-19 advance tax credit.

The bottom line, Nitti points out, is that "every taxpayer who has not yet filed their 2019 return must consider whether doing so will increase or decrease their stimulus payment and react accordingly."

Too late for 2019? Of course, if Uncle Sam really is able to meet his goal of getting the checks out in three weeks — OK, it's actually Treasury Secretary Steve Mnuchin's target delivery date — then it's probably already too late to file your 2019 Form 1040. Even if you e-file, the IRS must process your submission.

Or, as CPA Lindsey Starrett pondered on Twitter earlier today, "if checks are in 3 weeks what is 2019 cut off date for processing to make that data included? Probably about yesterday?"

And if you've turned your taxes over to a tax professional, then it's out of your hands. Tax preparers were swamped before the coronavirus began spreading across the United States.

As the pandemic threw U.S. tax season into chaos, things got worse. Many tax pros have had to shutter their tax offices and work remotely, making their jobs are even more difficult.

I suspect Enrolled Agent Adam Markowitz speaks for many of his fellow tax professionals in his Tweeted reaction to Nitti's article:

Adam Markowitz Twitter post re CARES 2019 filings
What's your payment amount? Regardless of whether we've filed a 2019 return, plan to soon or are just going to let the IRS calculate our coronavirus relief amount based on our 2018 taxes, we all have the same question.

How much will we get?

This weekend's second Saturday Shout Out can answer that. It's The Washington Post's COVID-19 relief payment calculator.

A quick calculator note here. The WaPo online computation asks you to enter the number of dependent children you claimed on your return. It doesn't clarify there, in the calculator, that these dependent kiddos must be younger than 17; that's mentioned in the text following the entry box. So don't add the 19-year-old college student whose costs you're still covering. 

I hope you get the full amount — $1,200 for folks who file as single or head of household taxpayers or $2,400 for married couples filing jointly, with an added $500 for each qualifying child (which also are this week's By the Numbers figures) — this year. And soon.

If you don't, at least there's some, albeit many months away, relief.

Since this payment is designed as an advance tax credit that you'll actually claim (or rather reconcile) on your 2020 return, you'll get a change to recoup the remainder next filing season.

 

Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.

But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.

 

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Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

S M

Hello,
We were able to get a much larger stimulus check by not filing our 2019 return. With talk now of a second stimulus check, would you advise filing a Tax Extension (Oct 2020) with the possibility of getting a bigger stimulus check again?

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