Best Way to Return 3rd EIP Check to IRS?
Best Way to Return 3rd EIP Check to IRS?
The IRS just recently processed my 2020 tax return. Based on that, they mailed me an unexpected Third Economic Impact Payment check for $1400.
Unfortunately, and unbeknown to the IRS, my 2021 AGI will render me ineligible for any third EIP.
I don't want to owe the IRS money at the end of the year. Therefor, I want to return the funds. The two most obvious ways to do that appear to be these:
1) Follow the IRS direction, and return the check after voiding it.
2) Deposit the check, then mail an Estimated Tax Payment to the IRS for the same amount.
The concern I have with Option 1 is that I won't have a record — or really any knowledge at all — of the IRS properly crediting the voiding of the check. It just feels like sending it in to a black box, without knowing what happened to it. I would be upset if the payment was not properly cancelled out.
Option 2, on the other hand, provides me with bank records of the transactions. I'm in control with Option 2, and I'd be far more comfortable with that.
Would there be any issues at all in using Option 2? Would the IRS even care at all which method I use? Any other better options?
Thanks!
Unfortunately, and unbeknown to the IRS, my 2021 AGI will render me ineligible for any third EIP.
I don't want to owe the IRS money at the end of the year. Therefor, I want to return the funds. The two most obvious ways to do that appear to be these:
1) Follow the IRS direction, and return the check after voiding it.
2) Deposit the check, then mail an Estimated Tax Payment to the IRS for the same amount.
The concern I have with Option 1 is that I won't have a record — or really any knowledge at all — of the IRS properly crediting the voiding of the check. It just feels like sending it in to a black box, without knowing what happened to it. I would be upset if the payment was not properly cancelled out.
Option 2, on the other hand, provides me with bank records of the transactions. I'm in control with Option 2, and I'd be far more comfortable with that.
Would there be any issues at all in using Option 2? Would the IRS even care at all which method I use? Any other better options?
Thanks!
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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Re: Best Way to Return 3rd EIP Check to IRS?
You misunderstand the rules for the EIPs. If you qualify based on what they have on file now, you will not have to pay it back on your 2021 taxes. It's as if you never received it if you're ineligible based on your 2021 income.iceport wrote: ↑Wed Sep 22, 2021 3:03 pm The IRS just recently processed my 2020 tax return. Based on that, they mailed me an unexpected Third Economic Impact Payment check for $1400.
Unfortunately, and unbeknown to the IRS, my 2021 AGI will render me ineligible for any third EIP.
I don't want to owe the IRS money at the end of the year. Therefor, I want to return the funds. The two most obvious ways to do that appear to be these:
1) Follow the IRS direction, and return the check after voiding it.
2) Deposit the check, then mail an Estimated Tax Payment to the IRS for the same amount.
The concern I have with Option 1 is that I won't have a record — or really any knowledge at all — of the IRS properly crediting the voiding of the check. It just feels like sending it in to a black box, without knowing what happened to it. I would be upset if the payment was not properly cancelled out.
Option 2, on the other hand, provides me with bank records of the transactions. I'm in control with Option 2, and I'd be far more comfortable with that.
Would there be any issues at all in using Option 2? Would the IRS even care at all which method I use? Any other better options?
Thanks!
Re: Best Way to Return 3rd EIP Check to IRS?
Really???AnEngineer wrote: ↑Wed Sep 22, 2021 3:16 pm You misunderstand the rules for the EIPs. If you qualify based on what they have on file now, you will not have to pay it back on your 2021 taxes. It's as if you never received it if you're ineligible based on your 2021 income.
Are you certain? This is really free cash?
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: Best Way to Return 3rd EIP Check to IRS?
iceport wrote: ↑Wed Sep 22, 2021 3:21 pmReally???AnEngineer wrote: ↑Wed Sep 22, 2021 3:16 pm You misunderstand the rules for the EIPs. If you qualify based on what they have on file now, you will not have to pay it back on your 2021 taxes. It's as if you never received it if you're ineligible based on your 2021 income.
Are you certain? This is really free cash?
My understanding is it was based on previous earnings, with what you are earning today having no bearing on it.
Re: Best Way to Return 3rd EIP Check to IRS?
Yes. EIP does not need paid back. This is different than the advanced child tax credit payments also being sent out now.iceport wrote: ↑Wed Sep 22, 2021 3:21 pmReally???AnEngineer wrote: ↑Wed Sep 22, 2021 3:16 pm You misunderstand the rules for the EIPs. If you qualify based on what they have on file now, you will not have to pay it back on your 2021 taxes. It's as if you never received it if you're ineligible based on your 2021 income.
Are you certain? This is really free cash?
Re: Best Way to Return 3rd EIP Check to IRS?
Is this written somewhere?
My 2020 payments were based on 2019's tax returns, but then when I filed the 2020 return, I qualified for more. So my impression has been that the prior year's return was just used as a way to estimate eligibility, with final eligibility determined when the tax return is filed and the true income becomes known...
My 2020 payments were based on 2019's tax returns, but then when I filed the 2020 return, I qualified for more. So my impression has been that the prior year's return was just used as a way to estimate eligibility, with final eligibility determined when the tax return is filed and the true income becomes known...
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: Best Way to Return 3rd EIP Check to IRS?
Wow, I guess it's true!
From another Q&A:
That means my decision *NOT* to do any Roth conversions in 2020 netted me about $2,800, all told. (How would you model *that* little surprise in a Roth conversion spreadsheet?)
From another Q&A:
Thanks for the heads-up! (And I sure am glad I asked what I thought was a simple question.)I received a Third Economic Impact Payment. Do I need to pay back all or some of the third payment if, based on the information reported on my 2021 tax return next year, I don't qualify for the amount that I already received? (added March 26, 2021)
No, there is no provision in the law that would require individuals who qualify for a Third Economic Impact Payment or an additional payment based on their 2020 or 2019 information, to pay back all or part of the payment if, based on the information reported on their 2021 tax returns, they would have qualified for a lesser amount.
That means my decision *NOT* to do any Roth conversions in 2020 netted me about $2,800, all told. (How would you model *that* little surprise in a Roth conversion spreadsheet?)
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: Best Way to Return 3rd EIP Check to IRS?
If your spreadsheet was really good, it would have accounted for the EIP phaseout as part of the marginal tax cost of the conversion.
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Re: Best Way to Return 3rd EIP Check to IRS?
Re: Best Way to Return 3rd EIP Check to IRS?
That would qualify as "really good".