Tax season is upon us, and we’ve always recommended fiscally responsible ways to manage your taxes. This year is different and deserves special attention. Many people still wait for stimulus funds that have not yet been paid. If you want to receive the next stimulus payment, file your tax return as soon as possible.
Here are some more tax-related moves you can make to get a quick stimulus payout:
Direct deposit will help you receive your stimulus quicker
We recommend that you use direct deposit to collect any refunds due. This can be combined with electronic filing to get your refund within a week or ten days. This option is the best because it eliminates refund anticipation loans.
You “borrow” money from the IRS with a RAL. However, there is a large fee attached. Your tax preparer (usually) collects the entire amount of your refund to repay the lender.
We strongly advise people not to take a loan to pay for a tax refund; your refund is on its way, and you will have the money in less than one month, even if it’s a slow scenario.
The average taxpayer can expect to see a refund in their bank account within ten days if they file electronically and use direct deposit. Paying hefty interest and fees to get your money faster is not worth it. If you are so desperate to receive your refund sooner that you seriously consider a Refund Expectation Loan, then we recommend talking to a nonprofit credit counselor for some assistance. We don’t think RALs are justified.
Find out if you’re eligible for free tax preparation via VITA programs (Volunteer income tax assistance) or the Tax Counseling for Elderly (TCE).
Do not file an extension for your tax return.
It is always better to prepare your taxes earlier rather than later. You need to know your current situation as soon as you can. Will you be getting a refund? Do you owe money?
If you owe money, you should prepare your return as soon as possible so that you can calculate how much you need to save to pay your tax debt.
Plan to file your extension as soon as possible.
This year, the deadline for filing taxes has been moved to May 17th.
Keep up to date with the latest updates on stimulus checks
According to the latest updates, the third stimulus payment should be sent to certain individuals this week. The IRS Get My Payment Tool allows you to check the status of your next stimulus payment. Check the blog frequently for updates and be aware of any changes that may occur in the proposed legislation.
There’s no need to wait. If you file early, the stimulus payment you are due will be deposited directly into your bank account.
The IRS is likely to use your latest tax return to determine your eligibility for the stimulus payout. This means that you should not wait.
It’s not clear if the IRS is going to base your eligibility for the stimulus payment on the 2019 or 2020 tax return. However, for many people, 2020 was the year with the lowest income. You want to file as soon as possible so that you are more likely to receive the full amount. Do not wait to file for fear that the IRS will use the most recent return. This is especially true if you earned more in 2019.
Get unpaid stimulus money.
If you’re one of those people, then you may have missed some money from the first two stimulus payments. You’ll want to get your taxes filed as soon as possible if this is you. The IRS will include any overdue funds with your tax refund.
If you don’t get a stimulus payment this year but owe money, you will likely receive a credit for next year’s tax. It’s still better than getting no money, but you should file your taxes as soon as possible to avoid having to wait.
The IRS offers a portal called “Get My Payment,” which will allow you to determine whether you should claim a Recovery Rebate Credit for any stimulus funds you may have missed on your tax return this year.
Check your state laws.
Check to see if there are any special tax provisions in your state for Coronavirus. You should be aware of this if your state has special requirements for income tax rebates due to Coronavirus.
There are over 50 different tax laws. It’s difficult to determine in advance whether this type of tax issue will apply to you. You’ll need to do extra research when you file your taxes to ensure you pay everything you should. It’s a good reason to start your taxes as soon as possible!
Start Now
Prepare your tax return immediately, even if you cannot afford to pay the tax bill. You’ll then know how much you need to save to pay your debt.
After preparing your tax return, you will have a clearer idea of your financial situation. If you have debts that are making recovering from the pandemic more difficult than you anticipated, speak to a nonprofit credit counselor today for free advice and assistance.
