As the long-awaited third stimulus check nears congressional approval, it looks like the IRS will be in place for a busy few weeks at the end of March.
The IRS is not only responsible for the administration and distribution of over 150 million direct stimulus payments, they are also in the middle of a particularly busy tax season. As it stands, the deadline for Americans to complete their 2020 tax returns is April 15 and the tax administration insisted that they no plans to push back the national deadline.
IRS Already Received 55 Million Tax Returns By The April 15 Deadline, A Huge Increase From Last Year – Here’s Why https://t.co/LFkIFDjTWW
– MarketWatch (@MarketWatch) March 3, 2021
The tax filing and stimulus verification process relies heavily on the adjusted gross income of filers to establish eligibility, but what is AGI and how can you find yours?
What is AGI?
The IRS defines AGI like “Gross income less income adjustments”.
To break this down: ‘gross revenue’ is the total amount you receive in a year (including salaries, dividends, capital gains, business income, retirement distributions, and any other stream of income); while ‘adjustments’ covers things like educator expenses, interest on student loans, payment of child support, and contributions to a retirement account.
The adjustments will not be included in your AGI, so your AGI cannot be greater than your total gross income but it can be lower if you have adjustments.
The AGI is a product of your most recent tax return, so married couples who file jointly will have a combined AGI. This means that all income and adjustments will be grouped together to produce a single figure.
Why do I need to know my AGI?
The most pressing financial concern for many right now is the fate of the third stimulus checks and for most of your payment eligibility will be based on your AGI. The income thresholds included in the eligibility requirements relate to your AGI, so they will decide the amount of payments of $ 1,400 you can receive.
Late amendment to President Joe Biden’s stimulus bill changed upper disqualification threshold people with an AGI greater than $ 80,000 and couples with an AGI greater than $ 160,000 to receive money in the form of a stimulus check. The total amount of $ 1,400 will be available for people with an AGI of less than $ 75,000, or $ 150,000 for couples.
NEW: Senate will reduce eligibility for stimulus checks as part of a deal between Moderate Democrats and Biden.
Singles under $ 75,000 get the full $ 1,400. But it goes to zero at $ 80,000 (not $ 100,000).
Couples under $ 150,000 receive the full amount. But zero to $ 160,000 (not $ 200,000). https://t.co/iNMMppOugZ
– Sahil Kapur (@sahilkapur) March 3, 2021
Your AGI is also used to calculate deductions and credits you are available in your regular tax return. For example, itemized deductions like medical and dental expenses must be reduced by 7.5% of your AGI for 2020, limiting the amount that higher income individuals can claim.
For more information, this TurboTax practical guide explains how adjusted gross income can affect your tax returns with additional deductions and credits.