Personal Finance

A second round of stimulus checks could be on the way. Here's what you can do to prepare

Key Points
  • A second set of stimulus checks could be coming. But it could take weeks to know for sure.
  • Like the first round, those checks would likely be based on your past federal tax returns.
  • That means it could be wise to make sure you get your latest tax return in now. 
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If you're like most Americans, you are probably watching Capitol Hill closely to see if new relief legislation will include another round of stimulus checks.

Senate Majority Leader Mitch McConnell said Friday that Congress will decide whether to pass a "final" coronavirus relief package in the coming weeks. 

"We're taking a careful look at a fourth and final bill," the Republican said in his home state of Kentucky. "You could anticipate the decision being made on whether to go forward in about a month. And it will be narrowly crafted, designed to help us where we are a month from now, not where we were three months ago."

To ensure you get that additional stimulus money, you would also be wise to do something else – file your federal tax returns, if you haven't done so already, experts say.

The IRS extended the federal income tax filing deadline to July 15 from April 15 this year due to the unprecedented challenges posed by the coronavirus.

At the same time, the IRS worked to deploy millions of one-time checks of up to $1,200 per individual or $2,400 per married couple, plus $500 per child under 17.

Now, legislators are poised to consider a second round of payments after House Democrats passed a bill that calls for another set of checks.

The new proposal also calls for checks of $1,200 per individual who earns up to $75,000 or $2,400 for couples making up to $150,000. Those payments are reduced for income above those levels and ultimately phase out completely at $99,000 for individuals and $198,000 for married couples.

But Democrats want to sweeten the payments for dependents by increasing them to $1,200 for a maximum of three per family. In addition, children 17 and up and non-citizens would also be eligible for both the first and second payments, if the proposal goes through.

But those terms are subject to change, based on what lawmakers in the Senate sign off on. Meanwhile, the White House has signaled that it would be open to a second round of checks.

White House likely to support new round of stimulus checks
White House likely to support new round of stimulus checks

Admittedly, it could take lawmakers weeks to agree on the terms. Then checks would be sent out, which would also take more time.

Tax experts said this gives Americans a window to file their tax returns, which could help them with regard to eligibility for those checks.

Stimulus payments are based on past returns

Like the first round of stimulus payments, the Democrats' proposal would base the payments on past tax returns.

If the government has your 2019 return, it will base your stimulus payment on your adjusted gross income in that filing. If not, they will use your 2018 return.

So if your income went down in 2019, you could qualify for a bigger stimulus check based on that filing. If you had another child in 2019, that change would also mean you qualify for more money.

"If you have an event that might increase your potential stimulus check, if there is a second round, you want to make sure that 2019 return is filed," said Henry Grzes, lead manager for tax practice and ethics for the American Institute of Certified Public Accountants, or AICPA.

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Admittedly, there have some delays in processing returns due to the coronavirus pandemic. Paper returns in particular have been slower to process. The IRS announced it will start processing amended returns electronically later this summer.

Of course, not all Americans are required to file tax returns, particularly if they have little to no income. For those people, the IRS has a non-filer tool that those individuals can use to put in information to receive their stimulus payments.

"If they don't have information on you, it doesn't mean you're not eligible for one," Grzes said. "You'll get one eventually. You'll just maybe not get it as quickly as those other folks."

A refund could be waiting for you

Procrastinating on your tax return may only be hurting you in the end.

"Whether there's a second round of COVID-19 checks or not, you probably have a refund waiting for you anyway," said Pete Sepp, president of the National Taxpayers Union.

And the longer you wait to file, the more time it will be before you receive that money. Meanwhile, your refund could be bigger than a second stimulus check.

"They're leaving money in the hands of the government that they should be getting back in their own pockets," Sepp said.

So who's getting the stimulus checks?
So who's getting the stimulus checks?

Your taxes could provide clues to a bigger paycheck

Once you do your return, you may be able to evaluate how much is withheld from each paycheck.

By reducing that amount, you can increase the size of your paycheck while decreasing the amount of your anticipated return at the end of the tax year.

"It's more money in your pocket quicker," Grzes said. "You can provide your own personal stimulus by doing that."

Of course, you want to take into consideration any additional pay, such as investment income, that could increase what you owe the IRS at the end of the year.

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