The Internal Revenue Service recently announce a three-month extension on the traditional April 15 deadline for filing the 2019 federal income taxes. The move was made in accordance with the government’s Covid-19 pandemic response where at least a dozen states have implemented quarantine measures. Indeed, it’s a welcome move in these times of uncertainty.
But just because you have three more months to file doesn’t automatically mean that you should wait. You may be in a better position to file your income taxes early!
While you may want to wait for the three-month extension deadline, you should reconsider it since there may be monetary benefits in it. You don’t want to miss the opportunity to get your money back, literally, an opportunity that the government wants to give certain groups of taxpayers.
If you’re expecting a significant tax refund, you will be able to get your money quickly if you filed your return now. Your refund will be processed according to the standard process. You will then be able to get your refund check earlier than if you filed your return at a later period.
Did you know that the average refund was $2,900 as of March 20, 2020? This is according to the IRS and it’s quite a bit of money to sustain your family through the quarantine period.
Yet another reason to file your return early is when you’re qualified under the federal stimulus law. Congress recently passed a $2 trillion relief package, a law that will release payments to Americans affected by the suspension of work and businesses. This means most Americans will likely qualify for the relief package although the amount will vary depending on their income.
Married couples filing their returns jointly and with income up to $150,000 will receive $2,400 in total. But people with higher income can get either less or nothing. People with income up to $75,000 may receive $1,200 while parents will get $500 for every child 16 years old or younger.
What’s the connection between what you will likely receive and filing your returns early? The IRS will base the amount on the 2019 tax return information or, in case of non-filing of the 2019 returns, on the 2018 returns. The actual amount you receive will then change depending on the year it was based on.
Even people who don’t file tax returns, such as on the low-income group, has to file their 2019 return, too. Again, it’s necessary to be qualified for the stimulus payment.
And then there are the people who don’t need to file their federal income tax returns early and yet they will receive the stimulus relief. These include Social Security recipients whose payments will be automatically mailed to them or be credited to their bank accounts.
With the three-month extension, you can also choose to file your return whenever you’re ready but only pay on July 15, a possible scenario if you owe taxes in 2019. You may also request the IRS for an instalment plan in case your finances aren’t secure enough for a one-time payment.
The bottom line: Your unique circumstances will influence whether you will file early or file later. You should discuss your circumstances with your Liberty Tax advisor in more detail so you can make a smarter decision.