Today, Monday, May 17, is tax day or, more officially, the federal income tax filing due date for individuals for the 2020 tax year. It was pushed an extra one month and two days in an effort to give filers (and the besieged agency) more time to deal with pandemic-related complications.
Of course, people miss deadlines all the time, and it’s possible you’re considering being one of those people. This year, more than most, you shouldn’t for a simple reason: the effects of the pandemic mean that filing on time could be particularly lucrative in 2021. Here’s why you should really try to get your taxes in today—and what to do if you absolutely can’t.
You’ll get any stimulus money you’re owed.
There are several reasons you might not have received the entirety of the economic impact payments that are owed to you. Maybe you had a kid last year and the IRS didn’t know to send you extra funds for each dependent. Maybe your adjusted gross income decreased to a level that made you eligible for payments. Maybe you just had a kid and need the IRS to know that you qualify for the tax credit for kids. Maybe there was some kind of clerical snafu at the IRS, which is totally possible given how underwater the agency is.
No matter the reason, the only way to get the stimulus money you’re owed is by calculating and claiming a Recovery Rebate Credit on form 1040. The sooner you do it, the sooner you’ll have the money that’s rightfully yours.
You’ll make sure you get the new child tax credit.
The first round of payments from the new child tax credit begins to go out on July 15, and if your income or number of dependents has changed since you last filed, submitting a new tax return is how you can let the IRS know that you’re eligible for the credit—which 98 percent (!) of American households with children are.
If your return is delayed, you’ll earn interest.
The IRS is struggling to deal with the tax changes in the American Rescue Plan enacted in March after around 14 million returns were already filed. It also was suddenly tasked with distributing stimulus payments and the new child tax credit, all with around 15 percent fewer employees than it had a decade ago.
All of that adds up to delays, which means that even if you file today you’re likely going to wait a while to receive any return you have coming to you. The good news is that the IRS will pay interest on those returns when it eventually gets the money out to on-time filers.
Filing late can cost you.
Filing taxes late usually means a fee of five percent of the tax you owe for every month your return is late. And if you’re more than 60 days late, the minimum penalty is the smaller of $435 or the tax you owe. If, on the other hand, you are due to receive a refund, then there isn’t a penalty for filing your return after the deadline, but why wouldn’t you want to get that amount ASAP?
But if you really can’t file your taxes today…
…you should file a request for an extension today. File Form 4868 and you’ll have until October 15 to file your taxes (without any of the benefits outlined above).