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It feels like 2020 has been longer than a decade, and many Americans are looking forward to some financial relief with an early tax return.
But when can you file your taxes for 2020? Here we discuss the tax deadline for this year, how early you can start filing, and all you need to know for a successful tax season.
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Whether it’s corporations or an individual, tax returns need to be filed by April 15th, 2021, for the 2020 tax year.
If your tax return is related to partnerships or S corporations, the filing deadline will be extended by a month – March 15th, 2021.
But when can you file your taxes? The good news is you don’t have to wait for the deadlines before you file your taxes. These dates don’t actually prevent you from filing your taxes earlier if possible.
Through electronic filing (e-file), you can submit your tax returns to the Internal Revenue Service (IRS) from January 15th to February 1st, 2021. Visit the IRS website to double-check the dates for e-file.
Most U.S. citizens will have to file their taxes – even if you’re a child or a hundred years old – as long as you meet the income threshold. This income threshold amount is determined by certain categories, including age, income level, and filing status.
The income thresholds can also vary depending on how much you’ve earned in the year, whether you’re married and supporting a family, and can change once you’ve aged beyond 65.
Below are the different income thresholds for the various categories for 2020:
These thresholds normally increase each tax year and will be published on the IRS website.
You will also have to file if you were the recipient of advanced premium tax credits for health insurance or have claimed the American Opportunity Credit, Earned Income Tax Credit, or other refundable credits.
If your taxes were simple and straightforward, it can take around three weeks – or 21 days – for you to get your tax return. This time period is however only applicable if you submit via electronic filing (e-file). Electronic filing is the fastest route to getting your tax return paid back to you.
With paper filing, however, the Covid-19 pandemic is causing mail processing delays for the IRS and in turn, can delay payment of your tax return. Your tax payment will also be delayed if you need to provide more documentation to the IRS.
Certain tax credits could also delay your tax return for 2020, especially if you’re claiming for the Earned Income Tax Credit or the Additional Child Tax Credit. Refunds for these tax credits are only expected to be released after the middle of February, and the IRS will hold your entire tax refund if these credits are included.
Another way to speed up the process is to sign up for free direct deposits into your bank account, giving you quicker access to your money.
You could also apply for a tax refund loan. A tax refund loan can advance you money as soon as the IRS accepts your tax return and confirms your refund. As soon as your refund lands in your bank account, you just pay back the tax refund loan. Be sure to only take out these kinds of loans from reputable institutions and watch out for hidden fees!
You will need the following information, where applicable, for yourself, your spouses, and any dependents:
If you were a recipient of an Economic Impact Payment in 2020 due to the Covid-19 pandemic, it will have an impact on the total taxes owed to the IRS or to you. Part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), these stimulus payments are advance payments for refundable tax credits based on your 2018 or 2019 tax returns. If you didn’t qualify for it initially, you may still receive the credit based on your 2020 tax return.
You should do your best to avoid filing your taxes late. Taxpayers who miss the deadline face heavy penalties for late filing.
Payments owed to the IRS will accrue interest after the deadline. Plus you’ll also have to pay a late filing penalty. This is normally 5% of the tax you owe after the deadline for every month or part of the month that it’s late, and can increase up to 25%.
If you happen to be more than 60 days late, the minimum penalty owed will be $435 or the amount of tax owed – whichever is less.
In addition to the late filing penalty, there will also be a Late Payment Penalty. Similar to the other one, this starts at 5% of the unpaid tax amount for each month or part thereof and can also increase to 25%.
Luckily, you can request a tax extension. However, you still have to adhere to the original deadline for tax payments – miss this deadline and you’ll still be liable for penalties and interest.
Fortunately, filing late won’t book you a spot in prison – unless you’re found guilty of tax evasion, not being honest about how much you’ve earned, or outrightly refuse to file your tax return. In these cases, you could go to prison for up to five years, and ten years if you omit foreign bank and financial accounts in your tax return.
Even if you don’t have the money to pay your tax bill, you’ll still avoid jail time by filing and negotiating with the IRS on a payment plan.
If you do find yourself in a situation where you’re forced to apply for a tax extension, you’ll need to get Form 4868 (Application for Automatic Extension of Time To File U.S. Individual Income Tax Return).
This form needs to be submitted by the tax deadline – April 15th, 2021, for this year. This can give you up to six months’ extension to submit your taxes.
However, as mentioned, this extension only applies to filing your taxes and not for the payment of taxes. Paying your taxes still needs to be done on the main due date.
Filing earlier doesn’t only get you your tax refund quicker, but also gives you peace of mind that the IRS won’t be knocking at your door for at least another year.
You might feel a little overwhelmed with all the steps that go into filing your taxes. But at least you now know when you can file your taxes. As long as you keep your records organized throughout the year, tax season should be a breeze.