As the coronavirus began to hit the U.S. hard, Congress sprang into action and authorized COVID-19 stimulus money for most Americans. The IRS has now delivered 159 million payments valued at $1,200 per adult and $500 per eligible dependent for those making under $75,000 as single tax filers or $150,000 as joint filers.
Sadly, some retirees missed out on their portion of the $267 billion that was delivered for one simple reason: Their incomes were too high. Anyone with incomes above those $75,000 and $150,000 thresholds lost some of their stimulus money, and those with incomes substantially above those thresholds didn't get any money at all.
If you were one of the retirees who missed out, however, all hope isn't lost. In fact, there is something you might be able to do to get this money -- if it's financially feasible for you.
How to get your COVID-19 money if you missed out on it because your income was too high
For most retirees, income comes from investment accounts and Social Security benefits. With the maximum Social Security benefit providing just $45,480 in annual income in 2020, retirees who were over the limit for COVID-19 payments most likely exceeded that threshold because of investment income.
For some seniors, money is taken out of their investment accounts not necessarily because it is needed, but to comply with required minimum distribution (RMD) rules that mandate you withdraw a certain amount from tax-advantaged accounts (such as 401(k)s and IRAs) after you reach a certain age. For those seniors, there's some good news -- coronavirus relief bills suspended RMDs for 2020, so you don't have to take any withdrawals. And the IRS has announced they'll let you put back any RMDs you withdrew before that legislation passed.
These relaxed RMD rules mean you have more control over your 2020 income -- and if you can afford to, you can keep your investment withdrawals limited so you don't exceed the income limits for stimulus money. That might be easier to do this year than most, as many are living on a smaller budget as COVID-19 has made travel, dining out, and other typical leisure activities very difficult for retirees.
Of course, this approach won't work if you have income from other sources, such as wages or a pension, that put you over the income limits. But for seniors who were taking money out because the IRS said they had to, and who were missing out on their COVID-19 stimulus payment because of it, this is great news.
How you get the stimulus payment if you missed out
You may be wondering why your RMDs in 2020 affect your eligibility for the first COVID-19 stimulus payment, especially as the IRS based eligibility determinations on either 2018 or 2019 taxes (depending whether you'd filed 2019 returns yet or not).
The fact is, the COVID-19 stimulus check was actually an advance on a new tax credit created for 2020. So if you didn't get the advance because your income in past years made it appear you didn't qualify, you can still claim the tax credit when you file your 2020 returns. That means if you reduce your 2020 income to below the threshold for eligibility, you can file a tax return in 2021 to show your income was low enough this year that you're due a payment. While you'll have to wait until the IRS processes your 2020 return next year to get your cash, it's better than not getting it at all.