1

My in-laws retired last year and filed taxes early this year. As part of this, their 401(k) was cashed out and represented on their 2020 tax report. Because of this, they did not qualify for the 3rd stimulus check that just went out.

Is there a way to appeal which year was used to calculate qualification status? Had it been based on their 2019 taxes, they would have qualified for the full amount.

1 Answer 1

7

No, you don’t have a choice of the year (otherwise, I‘d use 1968, I had no income at all then).

However, the recent 1400 $ payment is based on 2021 income - only the preliminary calculation is done with 2020 (or 2019, whatever the IRS happens to have). So they have the whole year to plan careful, and get the 1400 per person when they file their taxes for 2021.

They might also have the option to undo the cashing out, and file a correction (but it’s probably too late to get the stimulus right away). Aside from that, cashing out is rarely a good idea…

5
  • "No, you don’t have a choice of the year" One does have some control over the year -- by delaying the filing of 2020 tax returns until closer to the due date, one can ensure that 2019 taxes is used to determine the initial 3rd stimulus check.
    – user102008
    Mar 22, 2021 at 3:18
  • I'm not sure I understand about the 2021 income. Are you saying when they file taxes next year (in 2022, for 2021), they could see the 3rd stimulus as part of that refund?
    – MrDuk
    Mar 22, 2021 at 15:10
  • 2
    @MrDuk : yes. Eligibility for the third stimulus depends on 2021 income.
    – Aganju
    Mar 22, 2021 at 16:27
  • Interesting, does that mean if I received the full amount but get a large bonus from my employer this year I could be expected to pay it back when I file next year's taxes?
    – MrDuk
    Mar 23, 2021 at 17:46
  • 1
    Unclear for this one: the previous two the decision was you will not have to pay it back, so you’re lucky. For the third stimulus, there was no official statement yet, but the general assumption is that they won’t take it back either.
    – Aganju
    Mar 23, 2021 at 18:05

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .