Filing early will also return refunds quicker
The IRS is urging taxpayers to file their returns as quickly as possible this year, which is normally sound advice, unless you fall into a specific group of individuals that may find themselves out of a stimulus check.
Lawmakers are considering legislation that would potentially dole out an additional round of direct payments to American households.
To determine eligibility for those payments, which are considered an advance on a 2020 credit, the IRS has referred to the most recent return it has on record for households.
For individuals who earned more in 2020 than in years prior – specifically enough to put them over the expected adjusted gross income threshold – that could be a problem.
Marianela Collado, a certified financial planner at financial planning firm Tobias Financial Advisors, told FOX Business that households in this specific circumstance may “not want to be so quick to file.”
“The IRS would [then] be looking to the 2019 tax return to determine eligibility or 2018 if 2019 hasn’t been filed,” Collado said.
Taxes are due by April 15.
On the flip side, Collado explained that people who earned less in 2020 than what is recorded on their 2018 or 2019 returns may want to file now.
These people can also claim prior stimulus payments they may have missed out on.
Typically, experts encourage individuals to file early for security purposes. Year after year, tax season has provided a ripe breeding ground for fraud, and the sooner an individual files their return, the less likely criminals will be able to fraudulently do so on their behalf using stolen personal information.
Filing early will also return refunds quicker.
Take a look at this Tax Strategy for Retirement complimentary download: