As you may know, this year’s tax deadline has been extended until May 17th. But should you wait until the last minute to file? Below are some reasons to reconsider that train of thought:
Historically the Internal Revenue Service (IRS) has been able to issue refunds in less than 21 days. It would also be wise to e-file your return and tie your refund to a preferred bank account, so you are not waiting to get a check in the mail.
Recovery Rebate Credit:
If someone did not receive a stimulus check or not the full amount, you may be able to get what you are owed by claiming the Recovery Rebate Credit on your 2020 return. Keep in mind the stimulus payments sent out previously were in reality just advance payments, so if the combined total of the first two stimulus checks is less than the amount of your Recovery Rebate credit, you would get the difference back on your 2020 return. This results in either a lower tax bill for you, or a refund.
Some folks that already received a third stimulus check will get a supplemental payment as well, called “plus-up” payments. How it works is if your 2020 return is not filed and processed by the time the IRS is ready to send your payment, then your payment will be based on your 2019 return. If your 2020 return is filed and processed, then your third check is based on that return. If however, your 2020 return is not filed and/or processed until after the IRS sends your stimulus payment, but before August 16th 2021, the IRS will send you a “plus-up” payment for the difference between what your payment should have been if based on your 2020 return and the payment actually sent that was based on your 2019 return or other data.
To get ahead of criminals, it is recommended to file a return early. If someone steals your personal information and files a fraudulent tax return in your name to get a refund, the IRS is not necessarily going to know it is a bogus return right away. Instead when a second return is filed (by you this time), that is when the IRS is going to know something is wrong. At that point, you may not be able to e-file your return and it may be too late anyway, the criminal could have already received your refund. So basically, the earlier you file the better chance you have of not having to be in this scenario.
Monthly Child Tax Credit Payments:
Filing your 2020 return can also help the IRS set up monthly advance payments of the 2021 child tax credit to you. According to the IRS, these payments are expected to start in July. Half of your credit amount will be payed monthly from July- December 2021. The other half will be claimed on your 2021 return when you file.
Besides these five main points of consideration, you may also have earlier deadlines depending on where you live with state-based taxes.
We hope this blog post provided you some helpful guidance regarding a subject we all dislike: taxes. If we can be of personal assistance to your life, health and retirement insurance needs, reach out to us!