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Tax experts usually advise people to file their taxes as soon as possible – this is the fastest way to get a refund and to know if you owe the IRS. It can also reduce your risk of fraud.
Then the pandemic hit.
Last year, the exclusions around the distribution of Covid-19 came in the middle of the tax filing season, which led to the extension of the deadline to 15 July 2020. This year, tax preparers and providers looked forward to more normal time until legislators added tax changes to the U.S. bailout plan, which was signed on March 11 by President Joe Biden.
The bill made changes almost a month after the IRS began accepting returns on Feb. 12, adding another layer of complication. This means that many taxpayers need to have a reason to file, even if it means delaying your refund.
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“There’s a lot going on, so there may be reasons to procrastinate,” said Richard Auxier, senior policy fellow at Urban-Brookings Tax Policy Center, adding that if you find something is wrong, you should probably go back and refill.
If you were one of the millions of Americans who had unemployment income in 2020, you may not want to file taxes anymore, or if you have already filed them, edit your tax return.
The U.S. bailout plan made the first $ 10,2000 – or $ 20,400 – for a couple who filed jointly – of unemployment income tax-free for those with an adjusted gross income of less than $ 150,000.
The IRS said Friday that people with unemployment incomes in 2020 who have already submitted should wait for the modification of their returns as the agency will provide further guidance.
At the same time it is new instructions announced for those who were unemployed in 2020 and have not yet submitted. For paper files, the IRS provides the Unemployment Compensation Exclusion Worksheet, and also works with the software industry to update forms for those who submit electronically.
These forms will help taxpayers determine the right way to tell the IRS that they should get the exclusion, which is reported separately from unemployment income.
Paper files need access to the form, and those who submit electronically must make sure that the document they use contains the documents. It may take a while before the industry implements the new forms.
“I will not succeed with a return at the moment until we get an explanation on this, because at this stage I have no basis to support it,” said Edward Renn, a partner at the Withers law firm. .
If your income increased in 2020
Another reason to wait to file your 2020 tax is if your income has increased in 2020 so that you are not eligible for a stimulus test or that you reduce the amount you could receive from the federal government not.
The IRS said Friday that it will first review the 2019 returns to qualify for economic impact payments, and then move on to the 2020 return if submitted and processed.
This means that if you were eligible in 2019, you would want to wait to file your 2020 tax until you receive the stimulus payment – whether by direct deposit, a paper check or a debit card. Then you can submit your 2020 return. The reason for doing so? The IRS said it would not hold back the stimulus payment, even if they saw that you would not be eligible for the same amount based on the updated return.
To be sure, filing is the only way to get a refund if you owe it, and many people are eagerly awaiting the windfall this year.
In general, early submission is the best way to ensure you get a refund as soon as possible. This year, however, many taxpayers may experience delays if the IRS is now busy with both the tax filing season and send out a third round of stimulus cash.
And although the deadline for filing taxes on April 15 is fast approaching, it is possible to get more time if you need it. You can always apply for an extension. The proviso is that if you owe money to the IRS, it would still be due on April 15, and that you could see penalty if you did not pay by that time.
The extra complexity this year may make it worthwhile to enlist professional help.
“I recommend that this year of all years do not do it on your own,” said Adam Markowitz, an enrolled agent at Howard L Markowitz PA CPA in Leesburg, Florida. “People will be surprised to know how much money will be on the table.”
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