With the IRS in the process of issuing a third round of checks to many taxpayers, we thought it might be helpful to summarize each of the stimulus payments in one place. The three different checks each had their own rules surrounding phaseouts and and who qualifies. If you did not qualify for the first two payments based on your tax return on file at the time, you might be eligible for a credit with your 2020 return. The third payments going out now will also be based on your most recently filed tax return. If your 2020 tax return shows lower income than 2019 but is filed after the initial checks are issues, the IRS will re-evaluate your eligibility prior to September 1, 2021. As with the first two checks, if you still don't receive anything, you will have the option to claim a credit on your 2021 tax return, if your 2021 income puts you below the phaseout thresholds.

If we understand that we’ll never come up with a precise forecast of the future, we can try to be “roughly right” instead. This allows us to set the direction of the financial plan, but we’ll never be able to draw the exact map. As we like to say, your financial plan is a compass, not a GPS. Without it, you wouldn’t know where to go, but even with it, you’ll need to make course corrections along the way. Accepting this inability to precisely forecast the future will enable you to ignore the crazy market swings we see on a regular basis. And maybe it will give you a little more sympathy for that meteorologist who was calling for too much snow.

2020 will go down as one of the most challenging years in many of our lives. The COVID-19 pandemic took a toll on everyone. Hundreds of thousands lost their lives, leaving behind grieving family members who couldn’t say a proper goodbye. Countless others missed out on major life events, with weddings postponed and graduations held virtually. Our kids have missed out on a year of their short childhood, going to school online without any social interaction. We’ve all been in some stage of lockdown over the past year with many unable to see and touch their family and friends. As the year came to a close, it felt like we could all use a collective hug and some positive news.

In March, Congress moved quickly as COVID-19 spread across the country and shut down our economy. They passed a massive stimulus package called the CARES Act (Coronavirus Aid, Relief and Economic Security Act) that provided economic relief payments to millions of taxpayers, expanded unemployment benefits, and created a forgivable loan program for small businesses (Paycheck Protection Program)...

I started to write this article in July, after what seemed like a long five months of a worldwide pandemic that was starting to get better. We were learning to live with the uncertainty in our lives and the health and financial impact that COVID was causing. Masks had become commonplace and we had flattened the initial curve. Now, four months later, it feels like we are entering what could be the toughest stretch in this fight, but there is some light at the end of the tunnel. Our treatment of the virus has improved and there are several promising vaccines that will hopefully begin distribution soon.

Our income tax system is incredibly complex and constantly changing, which makes it very difficult to plan for the future. Individual income tax planning has historically been focused on deferring income and accelerating deductions. The theory behind this approach is to maximize the time value of money by paying as little tax now as possible, let your money grow over time, then pay taxes later. That approach has been changing in recent years, and as we have pointed out in past articles, sometimes it even makes sense to flip the script and accelerate income while deferring deductions. In order to understand why this makes sense, you have to understand the bracket structure of our tax system.