Every baby will bring a wider smile to their parents’ faces as they prepare to file the tax returns for 2020. The government has given them an additional stimulus check too. And you could be in for a pleasant surprise as you will receive an additional $1,100 for your baby.
After several hectic rounds of negotiations that prolonged the process, the COVID-19 Relief bill turned into a big win for President Biden as he finally signed the bill. Even as you read this article, the IRS has already transferred the first round of payment into bank accounts across the country. But many Americans, in their millions, are yet to get the first two installments of the stimulus payments. And many are new parents, those who have welcomed a baby into their homes in 2020. This includes children adopted in 2020.
The Third Stimulus Payment Brings A Pleasant Surprise For New Parents
There are several reasons why you haven’t received the previous stimulus checks. The tricky eligibility rules plus the complex formula adopted by the IRS ensured that many Americans were denied the stimulus check in the previous two rounds. But there is altogether a simpler reason why new parents missed out on the $1,100 stimulus check for their babies.
The Reason Behind The Windfall
The missing out was due to tax reasons. The newborn babies were not part of the list of dependents as they were born after filing taxes last year. They literally did not ‘exist’ for the tax authorities. And parents who did not file their taxes in 2019 could expect a double windfall. This windfall stimulus check is over and above the extended Child Tax Credit plus other similar tax breaks enjoyed by parents. And above all, your baby may well be eligible for a third installment of the stimulus relief. So here is all you require to be familiar with on claiming your due amount.
How Much More Can Parents Expect In The Stimulus Check For Babies?
Parents can expect an addition of $1,400 for every eligible dependent. But babies adopted or born in the previous year will bring an additional $1,100. If you haven’t qualified for the third stimulus payment, your baby will still receive their share if the parents have qualified for the initial two checks.
The initial stimulus payment was a maximum of $500 that Americans began receiving post-April 2020. The previous check had a limit of $600. So they add up to $1,100, as your baby is to be counted as a dependent.
Calculating What Your Baby Missed Out On In The Previous Stimulus Check
So if you were eligible for both the previous stimulus payments, each couple who filed jointly last year will be eligible to get $1,200 for each parent from the initial round, plus another $500 for your baby. For the second round, the child is eligible for $600 and the same amount for each parent. so the total comes to $4,700 for the two stimulus payments.
But the total payout from the stimulus payments in the previous round for babies born in 2020 was in all probability merely $3,600. This calculation is based on the assumption that no other stimulus check was missed out for various reasons. So there is a deficit of $1,100. The shortfall of $500 from the first round of the stimulus check, plus another $600 shortfall from the stimulus payment in the second round.
File Your Tax Return For 2020 To Claim The Additional Amount Missing In The Previous Stimulus Checks
So all you are required to do is to claim the missing amount of $1,100 is to file your tax return for 2020. That is the easiest way to claim the money you missed out on for qualified dependents in the previous year. Filing your tax returns immediately is the sure-fire method to recover any stimulus payment that you have missed out on in the last two rounds, post the Coronavirus Aid Relief and Economic Security Act.
As soon as the 2020 returns have been filed, the Internal Revenue Service will make use of the information and use it to process all your stimulus benefits in the future. If you have filed your tax returns for the first time, you also have enabled the direct transfer to your accounts of any stimulus benefits.
Filing For Any Omitted Dependent Stimulus Payment while You File Your Tax Returns
You have to carefully calculate the exact stimulus check amount that the IRS owes you. Also, find out the amount you have exactly received from the government as a stimulus check. The difference between the figures is the amount that you need to claim. This claim is through the RRC (Recovery Rebate Credit), which is a part of your return.
How Do You Make Use Of The RRC To Claim Any Missing Stimulus Payment
If you are one of the millions of Americans who have not received any part of their first and second stimulus check, you can easily do so as a Recovery Rebate Credit on your federal tax return of 2020.
You are only qualified for the RRC if you have failed to get your first two rounds of stimulus payments or have received only a part of it. If the payment has been lost in transit, contact and requests the IRS to first trace the payment.
Are My Dependents Eligible For A Third Stimulus Check?
Every qualifying dependent is eligible for an extra $1,400. So in all probability, you lose out this year if you haven’t already filed your taxes for 2020. So to claim a third stimulus check for the baby born or adopted by you in 2020, you will have to stay till you file the 2021 tax return only the next year. So you will have to claim the amount retroactively.
You can still claim your first two stimulus checks but will have to wait for the one just passed. There are several hazards to negotiate as there are ways that getting the third check during the tax season might affect finances.
Are You Aware Of Every Dependent Benefit Included In The Third Stimulus Check?
The Child Tax Credit previously gave taxpayers an additional $2,000 for every child. But under the Rescue Plan, the amount has almost doubled to $3,600 for every child below the age of 6. For children above 6 and up to the age of 17, the amount stands at $3,000. There are also expanded tax credits specifically for child care plus other benefits for dependents.
What Do You Do If You Have Received Stimulus Check For Your Baby Born Or Adopted In 2020?
If you are the fortunate few who will not need to dip into the stimulus check amount for everyday expenses, invest the amount for the child’s education. That can include setting up a 529 plan for your child. If it is used for the education expenses of the child, the amount will grow tax-free.