BUFFALO, N.Y. (WBEN) "It's an interesting year," said Esther Gulyas, the "Tax Lady" from EG Tax, when peppered with questions Tuesday morning about the soon to be approved third stimulus by Congress.
With many of us trying to decide whether to file now, or to wait, because of the $1,400 stimulus, the timing of when you file could affect the stimulus payout.
The issue, Gulyas says, is unemployment. "There's a big change in the bill for unemployment. With so many people collecting unemployment, you can't file until you find out about the change because it's believed they're going to be eliminating $10,200 of your 2020 unemployment." Anyone who has filed already will have to file an amended return if they received unemployment.
"We're in a wait and watch mode right now," said Gulyas. "First, they (Congress) has to pass it. Then we have to see how it is going to mesh into the 1040 form. The IRS will come out with guidelines." Gulyas advises those who have already filed, to not file the 1040x until after you get your refund.
For someone in the 10% tax bracket, this is about a $1,020 windfall when they file an amended return. "Make sure you wait for the guidance and don't file a paper return. The IRS is so far behind that if you send in a paper 1040x, it may get lost in the shuffle." Gulyas suggests you file electronically.
The stimulus income ceiling changed this time around. Previous stimulus had a ceiling of $75K for an individual and $150K for a married couple. Senate Democrats tweaked the phase-out rate. It's $75-80K for a single, or $150-160 if you're filing a joint return.
Dependents will get $1,400 up to age 17. "The real challenge," Gulyas says is what to do with kids over 17. "If they're in college and file on their own they'll get the stimulus. Parents have to weigh that against the American Opportunity Tax Credit, to determine which is better."
If you haven't submitted your taxes when the stimulus is approved, the IRS will rely on your 2019 income. However, the payment is technically based on the income you earn in 2021, which isn't yet known. If you earn less this year than in prior years, you can claim any missing payments on the tax return you file next year.
Gulyas is also watching to see what happens with the child tax credit. "It looks like kids under the age of six are going to be get a credit of 35-hundred dollars. And kids over the age of six will get 3-thousand dollars in direct credits. She is also
watching the earned income credit. The current version of the bill triples the credit. Under this scenario, if a parent makes 15K a year, with three kids, they might get a refund next year of 30-thousand dollars. This is not finalized yet.
