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This post is in response to an email that I received from reader N.B. (you know who you are or will recognize the question – I tried replying to your email but it bounced back to me!). The question refers to someone whose income in 2018 & 2019 was high enough that she will not qualify for a coronavirus stimulus check. But all is not lost for our reader…
Here’s the (edited) question:
N.B.: This is my question. My actions in 2018 and 2019 put me into AGI of over $200,000 in both years. That puts me out of qualifying for the $2400 Stimulus check as a married couple. Since my AGI would be less than $100,000 if I was not doing conversions or NUAs, I am wondering what I should do for 2020. I am reading that the stimulus check is some type of adjustment on 2020 taxes, so if I keep my 2020 AGI down, can I then qualify for the stimulus check when 2020 taxes are filed?
As I mentioned above, all is not lost. The nature of the coronavirus stimulus check is that it is an advance refundable credit for your 2020 tax return (to be filed in 2021). If it turns out that your income in both 2018 & 2019 was too high to receive the credit in advance (as in, beginning sometime in April, 2020), you may still have a chance to get this credit based on your 2020 income.
When you file your 2020 return in 2021, part of the calculations will consider first what your AGI (Adjusted Gross Income) was in 2018 & 2019, and whether you received a coronavirus stimulus check previously. If your income was too high and you did not receive the credit, your 2020 AGI will then be considered. If your 2020 AGI is below the thresholds ($75,000 for single, $150,000 for married filing jointly), you will be eligible for this credit when you file your 2020 return.
So what about the 2018 income versus 2019?
If your 2019 income is too high to receive the coronavirus stimulus check but your 2018 income was below the threshold – what happens there?
If you have already filed your 2019 tax return, it’s too late. Your applicable AGI will come from the 2019 return, and you can’t retract it. However, since you don’t have to file the 2019 return until as late as July 15, 2020 (or even as late as October 15, 2020 if you extend the return), you might hold off on filing the 2019 return. This way your 2018 AGI will be applied, and you should receive the coronavirus stimulus check.
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My 2019 AGI was higher than it otherwise would have been due to a 401k early withdrawal. This affected the amount of stimulus that I received. Is this something that I can recover some of that stimulus amount based on my AGI minus the withdrawal?
We won’t see the 2020 income tax return forms for quite a while, but the understanding is that if your income in 2020 is under the limits and your stimulus payment was either reduced or eliminated by your 2019 income level, you should be eligible for the remainder that your 2020 income reflects.
That’s my understanding, we’ll see when the forms come out.
Hey Jim,
Please expand on this sentence, “The nature of the coronavirus stimulus check is that it is an advance refundable credit for your 2020 tax return (to be filed in 2021).”
Suppose Elma and Elmo Bowlogritz estimated their 2020 MFJ tax bill to be $0 before they received the $2400 stimulus this week. Do I understand correctly that the Bowlogritz’ now have an estimated tax bill of $2400? Mr Bowlogritz tells me he is trying to figure out how one might characterize the stimulus deposit in Quicken.
No, if Bowlogritz’s income was below the threshold in 2019 (as reported on his 2019 return) and he received the full $2,400 credit, there will simply be an accounting for it on the 2020 tax return. If his income was above the threshold in 2019 but will not be on his 2020 return, then he can get the credit (or whatever portion he did not get previously) when he files his 2020 return.
My understanding is that there is no way this can result in a reversal of fortune for a taxpayer. In other words, there’s no payback regardless of income level in 2020.