The day after President Biden signed the American Rescue Act (American Rescue Plan), the IRS announced on the 12th that it had begun processing relief checks and that people would find the money had been credited by the end of the week; however, there were at least 9 million people who could not receive the $1,400 in relief money.
The Washington Post reported that a Family of five living in Alexandria, Virginia (Alexandria), 12 found a bank account “pending” (pending) 6892.90 yuan, the name of the money “IRS TREAS310- TAXEIP3” shows that the IRS “economic impact payment” (EIP).
According to estimates, about 9 million families of people who have received relief checks in the past two times will not be able to receive them this Time; the bill provides that individuals with an annual income of $75,000 or less can receive the full amount of $1,400 relief checks, $75,000 to $80,000 will be a decreasing amount, and annual income of more than $80,000 will not qualify; couples filing a combined tax return with an annual income of $150,000 or less can receive the full amount of relief checks, $150,000 to $160,000 will be a decreasing amount. The amount of $150,000 to $160,000 decreases, and more than $160,000 is excluded from eligibility.
The Wall Street Journal analyzed the bill’s content to lower the income limit for receiving bailout checks, coupled with the fact that the amount of bailout checks will be reduced proportionally after exceeding the annual income of $75,000 for individuals and $150,000 for families, which means that the “adjusted gross income” (AGI) will be reduced by as little as $10,000. The difference may be from being able to get the full amount of the bailout check to not getting it at all.
- If the 2019 AGI is low, delay your tax return
According to the report, if the potential bailout check is threatened to fall through because of the gradual reduction (phaseouts), there are three ways to consider. If the “adjusted gross income” for 2019 is lower than that for 2020, you can defer filing your 2020 income tax return because the IRS uses the taxpayer’s most recent tax return as the basis for issuing the bailout check.
- Consider “health savings account” to grasp before April 15
The Wall Street Journal reports that taxpayers can also try to reduce their “adjusted gross income” in 2020, but unfortunately, at this point in 2021, there are very limited strategies that will work, and putting money in a “health savings account” (health savings account, HSA) can be considered. The report points out that eligible taxpayers can allocate their income to a health savings account in 2020 before the April 15 deadline.
- Lower AGI for 2021 if both years of income are not sufficient
If you don’t qualify for a full bailout check based on 2019 or 2020 income, you may want to look into lowering your “adjusted gross income” (AGI) for 2021. The Wall Street Journal analyzed that the bailout payment is in fact a 2021 tax credit issued in advance to taxpayers, and if the taxpayer’s 2021 income meets the tax credit criteria, it will be calibrated for future 2021 income tax returns. Therefore, until the end of 2021, taxpayers can reduce their “adjusted gross income” in various ways, such as putting money into employer-provided pension plans, calculating tax-loss harvestin (TLH) or putting in qualified charitable distributions (QCDs).
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