After the US House of Representatives passed the Senate version of a $ 1.9 trillion bailout, millions of people who received the first two stimulus checks were able to watch the third round without them due to stricter payout rules.
But the tax code could give some people who are close to the deadline a route back to round three – if they have the cash available to get there, experts told MarketWatch.
Certain tax-privileged accounts could perform dual duties, helping people save on retirement and healthcare costs, while also helping them get paid for $ 1,400 for economic impact, experts say.
This time around, the stimulus checks will go away for those earning more than $ 80,000 and for couples earning $ 160,000.
"There are only two tax codes in the world: one for informed and one for uniformed," said Michael Foguth, president and founder of Foguth Financial Group in Brighton, Michigan. “This is the same scenario. "
The senators narrowly passed the last aid law on Saturday. This time, the $ 1,400 direct payments will end earlier once a household crosses the income threshold for full payment. Individuals earning less than $ 75,000 per year and their loved ones will receive checks for that total. Payments go down for those who earn $ 75,000 or more – and they expire completely for those who make $ 80,000 or more and couples who make $ 160,000 or more. This is a change from a previous income cap of $ 100,000.
In the first round of $ 1,200 stimulus checks, payments have been suspended for individuals earning $ 99,000 and couples earning $ 198,000. In the second round for $ 600, payments ended up at $ 87,000 for individuals and $ 174,000 for couples.
The Internal Revenue Service bases eligibility for the $ 1,400 check on the 2020 income tax return – or the 2019 tax return if the 2020 tax return is not yet available.
The House of Representatives passed the bill on Wednesday with 220-211 votes. President Joe Biden said he would sign the bill on Friday. The bill will distribute direct payments to 85% of US households. Checks could be on the accounts by the end of the month, White House press secretary Jen Psaki said ahead of the House vote.
According to calculations by the Institute for Economic Policy and Taxes, around 11.7 million adults and 4.6 million children will not receive third checks in the Senate version compared to an earlier version of the bill passed by the House of Representatives. Payments in the previous version of House would have ended up at $ 100,000 for individuals and $ 200,000 for married couples.
Foguth is checking whether some of his customers can find a way into the third round.
The counselor said he took calls from six clients, or sometimes their adult children. They are curious about how the stricter withdrawal rules apply and if there is anything they can do to possibly scrutinize.
"I think it's a fear of missing out," he said, adding later, "we're doing the numbers for someone."
Pamela Rodriguez does the opposite. About three times in the past week, the founder of Fulfilled Finances in Sacramento, California, analyzed clients' tax returns prior to filing them. With some strategy and planning, Rodriguez said she could potentially position them for a third check.
Don't worry, they told her. Other people needed the money more than she did, she remembered telling her.
If taxpayers can take advantage of a third stimulus check payment, should they do so?
Rodriguez said she was "a little surprised" at first, but understood her perspective. "It's almost like they feel morally compelled not to do that."
That begs another question related to a massive bill designed to get families, businesses, and local governments in trouble: If taxpayers can get an advantage and work their way into a third stimulus check payment, they should to do?
"Pay what you should, but don't pay a cent more," said Foguth. In that case, if there is a tax way to qualify for more money, at least they should consider it, he said.
Attempts to lower taxable income are a standard part of the wealth creation game, Rodriguez added. Still, the pandemic could give some wealthy taxpayers a break, she said.
The pursuit of personal gain could rub someone in the wrong direction, especially if their idea of success also keeps "the greater good" in mind, Rodriguez said. It depends on the question: "What does your personal success mean for you?" She said.
However one person answers the question, here's how tax code quirks and the pending invoice together create a way back for people who are now looking from the outside in.
Individual age accounts
The stimulus check amounts are based on the adjusted gross income of a household. IRAs can reduce adjusted gross income and contributions can still be made until April 15.
The annual contribution limits for a traditional IRA are $ 6,000, or $ 7,000 for those aged 50 and over. The dollar-for-dollar deductions on these posts can put someone outside of the limit within striking distance to get back on.
However, the rules quickly get complicated depending on marital status, income, and whether someone already has access to a retirement account such as a 401 (k) through an employer.
The IRS does not allow deductions for individuals who have access to retirement plans at work and earn just over $ 80,000 per year for a single applicant or $ 160,000 per year.
However, if you're single and don't have access to a retirement plan at work, the IRS says you can take a full deduction up to your contribution limit.
The same applies if you are married, do not have a pension plan at work, and are filing with a spouse who also does not have a pension plan. If you are married and are filing with a spouse who has a plan, the IRS also allows a full deduction up to the contribution limit.
"This works like a charm, you contribute to the spouse IRA," said Rodriguez.
There's a catch beyond tax rules, Foguth added. “To reduce income, they need to have money to get into these IRAs. … It's such a small part of the people who are going to get it. "
Health savings accounts
If someone has a high deductible health insurance plan – defined by the IRS as a deductible of at least $ 1,400 for a person and $ 2,800 for a family – they can contribute to a health savings account.
It's a pre-tax account and tax free when used for qualified medical expenses. There is currently a premium limit of US $ 3,550 and a premium limit of US $ 7,100 for family coverage.
Like an IRA, someone with an HSA has until April 15 to reach their maximum contribution.
Employer contributions to the account are not counted as income, according to the IRS. However, a person's own contributions are deductible, the IRS found.
A hypothetical single taxpayer earning $ 83,000 a year could potentially contribute $ 3,550 now (if they haven't already contributed during the year) to bring their gross adjusted income down and below the threshold, said Charles Sachs, chief investment officer at Miami Kaufman Rossin Wealth.
"It's really a good little side-note to put the money in," said Sachs. "The first thing the IRS will tell you is that you are perfectly in your portfolio" to work within the rules as they are written , he added. “These are not gaps. These are not gimmicks. "
According to the Employment Benefit Research Institute, an employee benefit think tank, there were more than 28 million HSA accounts valued at nearly $ 66 billion by the end of 2019.
The waiting game
Sure, there are income reduction methods that the IRS counts in returns. Another way to get under the stimulus-check wire is by checking the rate of return that the IRS sees, tax experts say.
The IRS will look at the 2020 return – those currently filed – and if it doesn't have access to these it will only look at the 2019 return instead.
If the 2019 return puts a person in eligibility but the 2020 return could turn them off, that's a strong reason to knock for a moment.
Even before lawmakers came to an agreement on the business cycle reviews, some financial planners advised their clients to slow down before filing and wait for the check at hand.
One of Rodriguez's customers would miss the chance for a third check if she filed the 2020 tax return, she said. The customer is waiting, she said.
Now, if people miss out on $ 1,400, they'll have to wait even longer. But they might get another chance at the check next year.
Like people who missed all or part of the money on the first two checks, someone who made too much this year to qualify might have a chance to claim the check for $ 1,400 in the next tax season, said Henry Grzes, senior manager of tax practice and ethics for the American Institute of CPAs.
For now, Grzes added, "If you clearly qualify below 2019 versus 2020 then say, wait."
This story was updated on March 10, 2021.