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The timing of filing a 2020 tax return is extra important this year — if you do it right, it can lead to greater stimulus scrutiny.
The Senate is expected to pass President Joe Biden’s stimulus plan this week worth $1.9 trillion, including $1,400 stimulus checks to Americans who receive the full amount.
So far, the payments have been based on the same requirements as the first two checks: The entire amount goes to individuals with up to $75,000 in adjusted gross income and married couples filing joint income of up to $150,000. In addition, dependent children and adults may also qualify for a check for $1,400.
Of course, some details could change in the coming days if the Senate bends the bill. Still, the timing of filing 2020 taxes before or after the stimulus is finally approved can make a difference in the size of stimulus check received.
When it makes sense to submit as soon as possible
One reason to file your 2020 tax returns before the next Covid relief bill passes is if you experienced something that changed your eligibility for a payment or means you should receive a larger amount, according to certified financial planner Luis Rosa, registered agent and founder of Build a Brighter Financial Future in Henderson, Nevada.
This includes matters such as a drop in income from 2019 to 2020, having a baby or bringing another child or dependent person into the house.
If so, you can claim past incentive payments on your tax return as a chargeback discount and make sure you have the most up-to-date information for the next round, he said. This could lead to a larger tax refund or a reduction in the amount you may owe to the IRS.
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If you’re someone who hasn’t had to file a tax return before, you’ll need to file one this year, as it’s the only way to claim stimulus checks you owed and make sure the IRS has your information for future payments. .
Those who changed bank accounts or moved in the past year may also want to file their tax returns now. As with previous incentive payments, the IRS will send subsequent payments first via direct deposit using the bank account on file and then by mail to the addresses they have.
If the IRS has an incorrect address or bank account for you, it can significantly delay the receipt of upcoming stimulus checks and possibly mean you won’t get one. If that happens, you may have to wait to claim the money on next year’s tax return.
“You may still end up getting the incentive payment on your return in 2021,” said Henry Grzes, chief manager of tax practices and ethics for the American Institute of Certified Public Accountants. “The problem is, if you need the money today, waiting until March 2022 to get the money isn’t going to help you.”
When it can make sense to wait
Of course, it may make sense for some people to wait to submit to get a greater stimulus check.
If you’ve made more money in 2020, you may not qualify for a payment or get a lower amount.
That means some people want to file their tax returns after the last Covid bill is passed and every stimulus has gone out, so the payment is calculated using their 2019 information. If you fall into this category, it may be worth preparing your 2020 taxes to see what your adjusted gross income was and compare it to the guidelines in the latest stimulus bill proposal, Rosa said.
“You can prepare your tax return and not file it, so at least you know where you are,” he said, adding that if you received a payment this way, you wouldn’t be penalized later or asked by the IRS to give. the money back.
To be sure, delaying filing your 2020 tax returns means you will be delayed in getting a refund you owe. For some, according to Grzes, it may not be worth waiting until after the stimulus bill has been approved.
“You don’t want to unnecessarily delay filing your 2020 return, especially if you’ve already been awarded $2,000,” he said. And if you owe the IRS, you must still pay your bill before the April 15 filing deadline or you could incur penalties.
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