There are only a few days left for individuals to file their 2020 tax returns without risking a penalty from the IRS.
This year, the deadline for tax returns is Monday, May 17. In March, the IRS pushed back the date for individual returns due to the coronavirus pandemic, giving most taxpayers an extra month to file.
Still, many Americans procrastinate when it comes to preparing and filing their taxes — even with additional time. Filing this year was made more complicated by the ongoing coronavirus pandemic and legislation passed in the middle of this year's filing season.
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If you haven't done your taxes yet, there's no need to worry, Jackson Hewitt Tax Services chief tax information officer Mark Steber said.
"There is still plenty of time to get your taxes prepared accurately and correctly," he said. "So don't panic."
Still, he does recommend at least coming up with a plan to file ahead of the deadline so you aren't caught off guard at the last minute.
"Speed and panic can lead to mistakes," he said.
Just get it done
In some ways, it has never been easier, thanks to several online programs that help people prepare and submit their returns.
"You still have time to collect your documents and file before the deadline," CPA and TurboTax tax expert Lisa Greene-Lewis said.
To ensure preparing and filing your return goes smoothly, she recommends gathering all income statements, accurate Social Security numbers for you and any dependents, correct bank information and receipts for charitable donations or items to deduct.
Greene-Lewis also recommends filing online and selecting direct deposit for any refund. This is the fastest way to submit your information and get your money back from the IRS.
If you need help, or aren't sure you've completed your return correctly on your own, it's also still possible to find a tax professional close to the deadline, Jackson Hewitt's Steber said — just because it's late in the season doesn't automatically mean you must do your taxes yourself.
"There's plenty of help to assist," he said, adding that people should still feel like they can reach out to industry professionals, schedule appointments or even walk in to locations that offer drop-in services.
"Tax industry players, big and small, live for this type of deadline and we help people both now and after," he said.
If you're expecting a refund
One of the most important reasons to file a tax return is to claim any refund you're owed. Through May 7, the IRS has received more than 126 million individual tax returns and processed more than 115 million. So far, the agency has sent out nearly 85 million tax refunds to Americans, with an average check of $2,863.
That refund is often the largest windfall families receive throughout the entire year and can be helpful in paying down debt, boosting savings and more. This year especially, after the impact of the coronavirus pandemic, Americans should claim any money they're owed.
It's important to remember that a refund isn't free money, according to Rebecca Thompson, director of the Taxpayer Opportunity Network at nonprofit Prosperity Now. It's money that you've overpaid the U.S. government, basically an interest-free loan. You are entitled to get it back.
While May 17 is the deadline for this year's taxes, it's also the date by which you must claim any refunds from 2017. Taxpayers have three years to claim refunds from the IRS. In April, the IRS said they still have $1.3 billion in unclaimed refunds from 2017.
"If they don't [file] then that money is lost and it becomes a donation to the Treasury," Thompson said.
Many credits to claim
This year, there are other reasons why submitting information to the IRS is important, even for those who don't traditionally file.
For one, filing a return and claiming the recovery rebate credit is the only way to get any economic impact payment that you may be owed, or get a "topped up" amount if your circumstances changed — for example, if you had a baby in 2020 who was eligible for a stimulus check.
The American Rescue Plan also made some tax changes. For the millions of Americans who lost work due to Covid, the first $10,200 of unemployment benefits is now exempt from federal taxes for those with income under $150,000. The exemption is $20,400 for a couple with the same income.
Parents also need to file a 2020 tax return to make sure that the IRS has accurate information for them to claim the enhanced child tax credit, which is scheduled to begin monthly payments in July.
Failure to file could mean owing more money
If you fail to file, you could miss out on refund money and potentially accrue penalties and interest if you owe the IRS.
"It is imperative for anybody who thinks they will owe to make sure that they get that tax return in or that they file an extension and it's accepted by the IRS and that they do that by the filing deadline," Thompson said. "If not, they will get hit with penalties for failing to file and failing to pay."
Of course, it is possible to file an extension by submitting Form 4868, which means you have until Oct. 15 to file your taxes.
"There is no shame in filing an extension," said Allison Koester, a former CPA and associate professor at Georgetown University's McDonough School of Business.
But that doesn't mean you're off the hook if you owe the IRS — the deadline for payment is May 17, whether you filed an extension or not. To avoid a penalty, you generally must pay at least 90% of what you owe to the IRS by the May due date.
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