How tax preparation and tax return is help you ?
Tax season is coming up, and this year, in particular, there’s a big reason for everyone to file a return, regardless of how much money they made last year.
That’s because the coronavirus pandemic has ushered in some key changes that make filing a return critical, even if you aren’t likely to get a large refund.
“This tax season is not going to look like any other,” said Tania Brown, a certified financial planner and coach at SaverLife, a nonprofit focused on helping low-income Americans save.
You may need to file to claim your stimulus checks
The most important reason that low-income Americans who previously didn’t need to file a tax return should do so this year is to claim the economic impact payments that they’re eligible for, according to Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center.
Non-filers — generally single, low-income adults without children — likely didn’t receive any of the stimulus payments that have gone out so far, as the federal government used IRS data to send them to Americans. Those who didn’t receive payments can claim them as a recovery rebate credit by filing a 2020 tax return.
“This will be a significant payment for people,” said Maag, adding that individuals could get up to $1,800 —$1,200 from the first payment and $600 from the second.
Having a tax return on hand will also help if there is further stimulus, said Maag. Those who have filed will have provided the IRS with either their mailing address or direct deposit information, so the agency will know where to send any future payments.
It’s also important that people who didn’t get the full amount of stimulus payment that they were eligible for file a tax return to claim the recovery rebate credit, said Maag.
This includes people who had a significant drop in income in 2020 from 2019 that would have meant a larger payment, as well as those who have a dependent child in their household that they didn’t have last year or a new baby eligible for a check.
You may be eligible for more credits this year
In addition, Americans may be eligible for different credits this year due to the coronavirus pandemic.
Most important, low- to medium-income Americans are generally able to take advantage of the earned income tax credit, a tax break which can be used to lower the amount families owe and potentially lead to a bigger refund. In 2020, the maximum credit for someone with no qualifying children is $538, and the most a family with three or more children could receive is $6,660, according to the IRS.
Some Americans who didn’t previously claim the earned income tax credit may be able to this year, depending on how much money they made. And, non-filers who submit a return for the first time for 2020 can look back over the last three years to see if they were eligible and retroactively file to claim the credit, said Maag.
Other changes will also ensure that families get the maximum credit they need, even if they lost income because of Covid. If you claimed the earned income credit in 2019 but had lower income in 2020, you can use your 2019 income again to claim the credit.
There are other credits that families may be eligible for or can use their 2019 income to claim in 2020, such as the child tax credit.
Filing as early as possible should help refunds come faster
To be sure, Americans could also experience surprise tax bills this year, especially if they received unemployment insurance or started a side-hustle amid the pandemic.
Still, experts encourage all Americans to file a tax return for 2020 and to do so as soon as they’re able to receive any refund as quickly as possible.
“Tax returns are a crucial lifeline for a lot of lower-income people,” said Brown.
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