The right time to file your income tax could mean a major stimulus check
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The time to file a tax return for 2020 is particularly important this year. If you get it right, it could lead to a major review of incentives.
The Senate is expected to take up President Joe Biden’s $ 1.9 trillion stimulus plan this week, which includes $ 1,400 stimulus checks for Americans who receive the full amount.
So far, payments are based on the same requirements as the first two checks: the full amount goes to individuals with gross adjusted income of up to $ 75,000 and to married couples who jointly submit income of up to $ 150,000. In addition, children and adult loved ones can receive a check for $ 1,400.
Of course, some details could change in the coming days as the Senate ponders the bill. However, the timing of filing taxes for 2020 before or after the final pass of the stimulus could make a difference in the size of the stimulus check received.
When it makes sense to archive as soon as possible
One reason to file your 2020 tax return before the next Covid Relief Invoice is issued is that you’ve experienced something that changed your eligibility for payments or means you should get a larger amount, according to certified financial planner Luis Rosa, Registered Agent and Founder of Build a Better Financial Future in Henderson, Nevada.
This includes things like a drop in income from 2019 to 2020, having a baby, or bringing another child or dependent into your household.
In that case, you could use any previous economic stimulus payments you owed on your tax return as a refund credit and make sure you have the most current information for the next round, he said. This could either result in a larger tax refund or reduce the amount you owe to the IRS.
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If you are someone who has never filed a tax return before, filing one this year is the only way to get the stimulus reviews you owe and to make sure the IRS has your information for future payments.
Those who changed their bank accounts or moved in the last year may want to file their taxes now too. As with previous stimulus payments, the IRS sends all pending payments first by direct deposit via the bank account on file and then by post to the addresses it has.
If the IRS has an incorrect address or bank account for you, it can significantly delay receiving pending stimulus checks and potentially mean you will not receive any. If so, you may have to wait to receive the cash for next year’s tax return.
“You can still ultimately get the stimulus payment for your 2021 ROI,” said Henry Grzes, senior manager of tax practice and ethics at the American Institute of Certified Public Accountants. “The problem is, if you need the money today, waiting until March 2022 to get the money won’t help you.”
When it might make sense to wait
Of course, it may make sense for some people to wait for the submission to get a bigger stimulus check.
If you made more money in 2020, you may no longer be eligible for payment or you may be eligible for a lower amount.
That means some people may want to file their tax returns after the last Covid bill is passed and all incentives are gone. Therefore, the payment will be calculated based on your information for 2019. If you could fall into that category, it might be worth preparing your taxes for 2020 to see what your adjusted gross income was and compare it to the guidelines in the latest proposal for a business cycle, Rosa said.
“You can prepare and not file your tax return so you at least know where you are,” he said, adding that if you received a payment that way, you would not be penalized or asked by the IRS to return your money .
Of course, if you fail to file your 2020 tax return, you will delay the reimbursement of the refund owed. For some, according to Grzes, it may not be worth waiting for a payment until after the economy has passed.
“You don’t want to unnecessarily delay filing your 2020 return, especially if you’ve already received $ 2,000,” he said. And if you owe something to the IRS, you still have to pay your bill by April 15th or you may incur penalties.
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