Many people procrastinate on taxes — filing their returns at the very last minute and maybe even stressing out as a result. If you’ve yet to start tackling your tax return this year, here’s some potentially good news: You now have another month to get the job done.
The IRS has just announced that it will move the normal April 15 filing deadline to May 17, giving taxpayers an extra month to complete their returns. But while that extra leeway is a good thing in theory, you may still want to get your taxes done sooner rather than later.
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Why did the IRS push back the deadline?
A big reason why tax filers now get an extra month to submit their returns ties into a key provision of the recently-signed $1.9 trillion coronavirus relief bill. Normally, unemployment benefits are subject to federal taxes, but as per the bill, jobless workers are entitled to a federal tax exemption on their first $10,200 in unemployment income. That’s a change tax preparers need time to adjust for, and so the IRS made the decision to give everyone the extra month to allow for that.
Should you delay your tax return?
If you collected unemployment benefits in 2020, you may want to hold off on filing your taxes. Wait until the IRS issues complete guidelines to ensure that income is reported correctly and you get the tax-free unemployment benefits you’re entitled to.
However, if you weren’t on unemployment last year, you may want to file your taxes soon, before April 15.
The reason? Each year, the majority of people who file a tax return wind up getting a refund. If you’re expecting to land in that boat, then the longer you put off your taxes, the longer it’ll take for that money to hit your bank account.
Furthermore, there are some people who may have been entitled to a first- or second-round stimulus payment under the previous two relief bills but never received it. If that’s you, your only option for getting that money now is to claim it in the form of the Recovery Rebate Credit on your 2020 return. But if you delay your filing, you’ll wait even longer to get your stimulus cash — money that’s already way overdue, seeing as how it went out last year.
Keep in mind that if you’re entitled to a $1,400 stimulus check under the newly-signed relief bill, that’s not something you can claim on your 2020 taxes. In fact, if you don’t have that money yet, there’s no reason to worry — the IRS is sending those payments in batches, and if you’re getting your stimulus in the mail, as opposed to direct deposit, it may not arrive until April or even May.
Another thing to note is that stimulus check changes affected nearly 12 million adults this round. If your last income on file with the IRS is $80,000 or more as an individual or $160,000 or more as a couple, you won’t be entitled to a stimulus payment under the third round — even if you were eligible under an earlier round. The income cutoffs for eligibility were specifically lowered for this latest round, and while that won’t impact most stimulus recipients, some people may not get a check as a result.
View more information: https://www.fool.com/the-ascent/personal-finance/articles/irs-moves-tax-day-back-1-month-heres-how-it-affects-stimulus-checks-and-unemployment/