The Internal Reserve Service will use a taxpayer’s most recent tax return, 2018 or 2019, to determine how much of a coronavirus stimulus check one will receive. Let’s review a couple of cases where certain taxpayers may or may not receive a stimulus check depending on their income and when they file their 2019 tax return.
Let’s say an individual had an adjusted gross income on his 2018 tax return under $75,000, which is the upper threshold set by the government to get a full stimulus check of $1,200. But his income jumped over $100,000 in 2019 for some reason. Let’s say he hit the lottery. If he didn’t file his 2019 tax return (most people wait when they owe the IRS a lot of money until the deadline for filing approaches), he would receive a $1,200 stimulus check because his 2018 tax return is used to determine his income. But if the lottery winner filed his 2019 tax return early for some reason, he wouldn’t get a check because his 2019 income was too high.
Conversely, let’s say a person, whose 2018 tax return showed an adjusted gross income in excess of $100,000, retired or got laid off in 2019 and his income dropped below $75,000. If he already filed his 2019 tax return, he would receive the $1,200 check. If he didn’t file his tax return for 2019 yet, he would not receive a check because his 2018 income is too high to qualify for aid.
As you can see from the above examples, the receipt of a stimulus check depends on whether or not an individual has filed his 2019 tax return. To be fair, the filing of 2019 return should not be a factor in determining whether one receives a check, unless there is some mitigating circumstance such as 2019 being the first year an individual files an income tax return. Since all 2018 tax returns have been filed and processed, it probably would have made more sense for the IRS to use them to determine one’s income. As desirable as it might be for the IRS to use the most current income data it has on file, the amount of stimulus one receives should not be left to vagaries of when one files his or her 2019 tax return.
In its rush to get checks out to individuals, congress obviously didn’t think this thing through as carefully as it should have had it had the luxury of more time. It also appears that the IRS wanted to simplify its job as much as possible. Therefore, it was most expedient for the IRS to simply look at the most recent the tax return on file in order to calculate how much of a stimulus, if any, a taxpayer would receive. At the end of the day, it is likely congress passed the bill in deference to the IRS, which is charged with getting the checks out to families and individuals.
Unfortunately, there are many taxpayers whose circumstances changed between 2018 and 2019. Some of these taxpayers decided to file their 2019 early while others decided to wait. As a result, many taxpayers who deserve a stimulus check will not get one because they weren’t clairvoyant enough to see what the coronavirus had in store in terms of government assistance.
In fairness to congress, it tried to do the right thing and expedited passage of the stimulus bill to help people. It is not surprising there would be problems with the bill, which congress may or may not have recognized at the time. But it isn’t too late to fix the problems or close loopholes in the stimulus legislation by passing an amendment to address the bill’s shortcomings.