How Filing Your Tax Return Early (Or Late) Could Impact Your Stimulus Check
How Filing Your Tax Return Early (Or Late) Could Impact Your Stimulus Check
By: Stacey Nickens
Tax season kicked off on February 12, and as of late February, the IRS had already received 21% more individual returns than on the same day in 2020. While some are waiting to see if the tax deadline is extended again this year, thus far most Americans must file their taxes by April 15. The only exception is for victims of the winter storms in Texas and Oklahoma. Those individuals will have until June 15 to file their returns.
As always, there are a number of reasons to file your return earlier rather than later. Earlier filers are less likely to be the victims of tax fraud and are more likely to receive their refund in a timely manner. Both of these reasons for filing earlier could be especially relevant this year given the volume of returns the IRS is already receiving. If you budget around your refund, you may want to file earlier rather than later this year to make sure you don’t spend money that you won’t receive. The IRS is reporting an average refund of $2,880 for the 2020 tax year. This is lower than last season’s average refund of $3,125. Filing earlier and knowing the actual amount of your 2020 refund will help you make better, more realistic budgeting decisions.
Additionally, your third stimulus check could be impacted by when you file your 2020 return. Depending on when the stimulus bill passes both chambers of Congress, the IRS will either use your 2019 or your 2020 return to determine the size of your stimulus check. If your 2020 return is already processed by the time the bill passes, the IRS will likely use your 2020 return to calculate your stimulus. If your 2020 return is not submitted and processed, the IRS will use your 2019 return to calculate your third round of stimulus.
Knowing this, you may want to compare your 2019 and 2020 financial situations in order to determine which will provide you with the most beneficial stimulus check. For example, if your income was lower in 2020 than in 2019, it would be beneficial for you to file your return earlier. Doing so could help ensure that your stimulus check is based off of your lower 2020 income rather than your higher 2019 income. The same would likely be true if you had a child or got married in 2020. Both of these life changes could increase the size of your stimulus check.
Comparatively, if you had a higher income in 2020 than in 2019, you may want to have your stimulus check based off of your 2019 income. You may be in a similar situation if you had a dependent on your return in 2019 who will no longer be on your return in 2020. If you got divorced in 2020, you should also consider the size of your stimulus with your joint income on your 2019 return versus the size of your stimulus with your individual income on your 2020 return.
There are a number of life situations that could have changed your financial picture between 2019 and 2020. You could review those changes to see how your stimulus check would be calculated if it were based on your 2019 return versus if it were based on your 2020 return. Overall, please keep in mind the April 15 tax deadline, the helpfulness of knowing the size of your refund, and the importance of avoiding tax fraud. I encourage you to send us your tax documents as soon as possible as well as to schedule your tax pick-up appointment.
