If you haven’t filed your 2020 tax return with the IRS, the clock is ticking.
The 2020 tax-filing deadline is just one month away, on April 15.
Even though the tax season started later than usual to accommodate a new round of stimulus payments, with the IRS now disbursing a third set of checks, don’t bank on any extensions to the filing deadline.
This year through March 5, the IRS had received nearly 56 million returns and processed nearly 49 million, according to the agency. They’ve also sent out more than 36 million refunds, with most of them deposited directly into taxpayer bank accounts. The average refund so far is $2,990.
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Filing taxes on time is extremely important for many this year. It’s the only way to get a refund if you are owed one. It’s also the method for many Americans to claim previous stimulus payments they were eligible for but didn’t receive.
“This is obviously something very, very different this year than anything any of us have ever dealt with before,” said Adam Markowitz, an enrolled agent with Howard L Markowitz PA CPA in Leesburg, Florida.
Here are a few things to check before you file.
If you had a drop in income in 2020 that would have made you eligible for any previous stimulus payments, or had an event such as having a baby that changed how much you should have gotten, you need to file a tax return and claim the recovery rebate credit to get that money back.
If you became eligible for the latest $1,400 payment in the American Rescue Plan, you also need to file your 2020 tax return so that the IRS has your updated information and can send you a direct deposit, check or debit card.
While this is the only way to get the payment, you don’t necessarily need to rush to file if you aren’t yet ready — the IRS said Friday it would look at both 2019 and 2020 tax returns and top up people who became eligible for checks or would have gotten more based on 2020 returns.
If you got unemployment insurance benefits in 2020, the American Rescue Plan made changes to what is considered taxable income. Now, the first $10,200 of those benefits — or $20,400 for a couple filing jointly, when both partners got unemployment — is not taxable for those who had an adjusted gross income less than $150,000 in 2020.
That will save millions of Americans from a surprise tax bill during a tough time. Still, if you had unemployment income in 2020, you might want to hold off filing your return to see if the IRS gives further guidance about how taxpayers should report unemployment benefits.
This might put some in a difficult situation, especially if they need to claim extra stimulus payments or are waiting on their tax refund.
What if you don’t have enough time?
If you won’t be able file by April 15, you can seek an extension to give yourself more time to collect the necessary documents and do everything correctly.
Remember, if you do take an extension, April 15 is still the deadline to pay the IRS any money you may owe, meaning you could be subject to penalties if you pay after that.
“If you owe taxes on April 15 and don’t pay it, then your clock for penalties gets started,” said Markowitz. On the flip side, if the IRS owes you money, you have three years from the filing deadline date to file an amended return and claim that refund, Markowitz said.
This year of all years, experts recommend that taxpayers get professional help filing, especially if they had any situations such as unemployment income that would add complexity to their return.
“It’s a bad year to try to do taxes on your own because you need to be with somebody who knows exactly what they’re doing,” said Markowitz.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.