Good news for some and bad news for others — tax filing season officially opens Friday, Feb. 12.
Opening day was pushed back for 2020 returns to allow the Internal Revenue Service (IRS) additional programming and testing time for systems following the Dec. 27 tax law changes that provided a second round of Economic Impact Payments (stimulus checks) and other benefits, a press release said.
Anyone using popular tax filing software may have already seen the section asking taxpayers to enter the amount of the two stimulus checks, if received. This is not to tax the relief money but to make sure anyone eligible received the full amount offered. If not, there is an opportunity to have it added to this year’s return as a Recovery Rebate Credit.
To speed refunds during the pandemic, the IRS urges taxpayers to file electronically with direct deposit as soon as they have the information they need. People can begin filing their tax returns immediately with tax software companies, including IRS Free File partners. These groups are starting to accept tax returns now, and the returns will be transmitted to the IRS starting Feb. 12.
Keep in mind that not all “free file” companies are free. Sort through the offers at irs.gov. Some companies will file the federal return for free and charge for the state return. Some companies will only file simple returns that do not include self-employment income or even accommodate retirement plan information without an additional charge. Also, some tax filing companies have income limits.
Direct deposit was the easiest and fastest way to receive the first two stimulus checks. Reports surfaced last year of delayed checks due to mail or lack of information on file with the IRS.
The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check Where's My Refund for their personalized refund date.
Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.
Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return. The IRS urges taxpayers and tax professionals to file electronically. To avoid delays in processing, people should avoid filing paper returns wherever possible.
File electronically and use direct deposit for the quickest refunds.
Check IRS.gov for the latest tax information, including the latest on Economic Impact Payments. There is no need to call.
For those who may be eligible for stimulus payments, they should carefully review the guidelines for the Recovery Rebate Credit. Most people received Economic Impact Payments automatically. However, those who didn't receive a payment or only received a partial payment may be eligible to claim the Recovery Rebate Credit when they file their 2020 tax return. Tax preparation software, including IRS Free File, will help taxpayers figure the amount.
Remember, advance stimulus payments received separately are not taxable, and they do not reduce the taxpayer's refund when they file in 2021.
Although tax seasons frequently begin in late January, there have been five instances since 2007 when filing seasons did not start for some taxpayers until February due to tax law changes made just before the start of tax time. To date, the tax filing deadline has returned to April 15, after being pushed back to July last year due to the pandemic.