2020 Taxes

I am working on my 2020 taxes and I wanted to point out something that might likely get over looked if you are using software. I am currently using H&R block but I also checked the Credit Karma tax and similar issue.

I am historically MFJ, standard deduction filer, with 2 small kids. We received a small amount on the first stimulus bill (these are really 2020 refundable tax credits) and zero on the second stimulus bill. We both have incomes above the starting phase out window for stimulus but mine is high enough to completely phase us out on a combined basis. If I file MFS and put the kids on the lower of our incomes, the amount of additional stimulus that we get back is about $1,800. This is particularly important on the next proposed stimulus bill that has yet to be implemented. This filing status change will trigger an additional few thousand more stimulus check (i.e. reduced taxes).

The main reason for wanting to file MFS this year is for potential student loan forgiveness. Last I have seen, they were talking about $125K income phase outs. Since your IBR payments are based on combined incomes if filing MFJ, then there is no reason to suspect that similar will apply to this. Our combined is well in excess of $125K but not for her individually. There are also more unknown issues that will complicate things for both people that have student loans.

I’m filing MFJ, but my wife passed last year. I got the 2nd stimulus, but I thought it was only for myself and the kid. Looks like the software is adding my wife’s portion. I’d have thought that if she qualified, I’d have already gotten it.

It’s also possible that there’s an error in my return. The state return was rejected and it took a herculean effort to get a supervisor from H&R Block to give me an explanation, which I’m still not sure is correct.

This is an interesting idea. I’m phased out as well, but my wife MFS certainly would not be. I’ll have to look and see if that would overcome the increase in taxes for me.

There are several things that you give up that may or may not apply to you. You cant take dependent care credits, you cant take student loan interest deductions, you cant take the other education tax credits and a few other things. Also when you file, you both have to choose itemized or standard deduction.

The stimulus is an advance tax credit on 2020 taxes. If your 2019 income was higher than in 2020, you are likely due more tax credit. If you received too much because your 2020 income increased, you don’t have to give it back. As far as repayment of stimulus for deceased, I don’t think they can force you to return it. My MIL received a $1200 check for my FIL that passed away in Dec-19. I think this got resolved by the second stimulus check.

For the 2nd stimulus, I got $1,200, which I assumed was for myself and the kid. I assumed they’d gotten info from the SSA that my wife had passed and not gotten hers. But I don’t know if that’s actually correct.