Want to file your taxes early?
Filing Your Tax Return Early Could Boost
Your Next Stimulus Check
There are a number of reasons to file your tax return early this year. A quicker refund and reduced risk of tax identity theft are at the top of the list for most people… and for some people, a larger stimulus check!
So who should file early and who should wait to file in April? The answer to that question depends on whether there were changes to your family or financial situation last year. That's because the next stimulus check will be based on your 2019 tax return or your 2020 return. And the return that was most recently filed when the IRS starts processing your stimulus payment will likely be the one that they use to determine your benefits.
When the IRS calculates the amount of your next stimulus check, they will review your tax filing status, the number of dependents, and your adjusted gross income (your AGI). That information will come from your 2019 or your 2020 tax return. If you file early, they will likely pull that information from your 2020 return. If you file later, they will most likely pull that info from your 2019 return.
And that dynamic gives you a little more control over your next stimulus check.
The IRS started accepting tax returns last week. The two-week delay in accepting tax returns was due to some unexpected programming that was required after the second round of stimulus checks were authorized.
If Congress passes President Biden’s $1.9 trillion budget reconciliation bill, that plan is likely to authorize another round of stimulus checks. Based on most estimates, the IRS is not likely to start processing third-round stimulus checks until the second week of March (or later!).
If you expect your 2020 tax return to drive a higher stimulus payment, then you may want to file your 2020 return as soon as possible. That way there's time for it to be processed before the IRS starts sending out stimulus payments.
So what things might cause a higher stimulus payment?
The following changes might drive a larger stimulus payment from your 2020 tax return:
THREE REASONS TO FILE
YOUR TAXES EARLY
You were married in 2020
You had a baby in 2020
You were claimed as a dependent on a 2019 tax return, but not on anyone's 2020 return
Your income was lower in 2020 than it was in 2019
And who might consider waiting to file their 2020 tax return?
-
If your income was higher in 2020 than it was in 2019, you may want to wait until April to file your tax return.
-
If you had a death in your family in 2020, and you have fewer dependents on your 2020 tax return, you may want to wait to file your tax return.
-
If you are losing the ability to claim your child as a dependent due to their age in 2020, you may want to consider waiting to file your tax return.
If you got divorced in 2020 the best path is less straightforward. There are several factors that could impact whether you should file early or wait.
For additional questions, please reach out to us at info@monotelo.com or call us at 800-961-0298.
Upload your doc's online, and start your return from home.
Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.