Disclaimer: ClearOne Advantage does not offer tax advice. Please consult with your accountant or tax professional for advice regarding your specific tax situation.
If you want to receive your tax refund as soon as possible, file your tax return at the first available opportunity. This year, that opportunity comes about later than usual.
COVID-19 has thrown a wrench into the works at the IRS. In December, as lawmakers hammered out the legal framework of the second round of stimulus checks and other benefits, they included some tax law changes. Due to these changes, the IRS needs additional time to iron out its tax preparation and filing systems. The delay means that you can file your taxes on February 12, 2021, at the earliest.
To speed up your tax processing/tax refund, you should use one of the e-filing options the IRS has made available and the direct deposit payment option. In these pandemic-ridden times, it makes sense to manage your finances online. In addition to the potential health risks, paper returns and checks limit the speed of the process to that of snail-mail.
The e-filing options the IRS has made available are:
- The Free File system for those whose 2020 income does not exceed $72,000. Those comfortable preparing their own taxes can also use the Free File Fillable Forms.
- Commercial software
- Authorized IRS e-file providers
- The IRS Volunteer Income Tax Assistance program and the Tax Counseling for the Elderly program for those who qualify
These tax filing practices represent a departure from the IRS’ usual MO, but extraordinary years call for extraordinary measures, and 2020 was indeed such a year.
When Are Taxes Due?
The tax deadline for 2021 is April 15. Last year, in light of the special circumstances, the IRS extended the tax deadline for 2020 to July 15. There are no similar measures projected for this year, although that might change as the filing/payment deadline approaches.
If you do not want to accrue tax debt, you should make sure that you have filed and paid your taxes in full by April 15, 2021. To get your tax refund earlier, complete your tax filing by February 12.
When Can You Expect Your Refund?
Following your successful tax filing, it should not take the IRS longer than three weeks to send you your federal tax refund. The Internal Revenue Service has always been keen on timely refunds, and there are no reasons why it should depart from its practices this year.
What to Do if You Cannot Afford to Pay Your Entire Tax Bill?
Going into tax debt is not an option. The IRS will collect what you owe, although it is possible to gain tax debt relief and even bargain with the IRS.
If you cannot afford to pay off your entire tax bill, do not panic.
- File your taxes anyway and pay off as much as you can. This way, you can avoid penalties and qualify for some form of tax debt relief.
- Ask the IRS for an extension of your payment period. If you qualify, the authority may grant you a reprieve of 120 days.
- You can ask the IRS to accept late payment due to financial hardship. Be aware that interest and penalties will accrue on your owed taxes, and you will sink deeper into tax debt.
- Work out a payment plan with the IRS. You can negotiate with the IRS and settle for less than the full amount you owe. The IRS’ Offer in Compromise option makes this settlement route possible. You need to make sure that you qualify, however.
- Take out a loan to settle your tax bill. Some loans, like HELOCs, may have lower rates than your tax debt.
- Sell something you own to pay your tax debt.
What You Should Also Know About Your 2020 Taxes
- If you have not received an Economic Impact Payment, you can claim a Recovery Rebate Credit (RRC) on your tax return. You are also eligible to make such claims if your EIP amounted to less than $1,200 or $2,400 for jointly filing couples.
- All those who have not received the full amount of EIP to which they were entitled may claim an RRC.
- Be aware that the interest you may have received on your federal tax refund in 2020 constitutes income and is, therefore, taxable as such. If you received such payments, you must report them on your 2021 tax return.
- If you made donations to a qualifying charitable organization in 2020, you can take a charitable deduction of up to $300, even if you don’t itemize.
- Never rely on your tax refund to cover basic living expenses or other major expenses by a certain date. Some claims on your tax return may call for additional investigation and delay the payment of your entire refund.
What about Credit Card Relief?
What should you do if you have paid your taxes with a credit card and have accrued too much credit card debt to handle? ClearOne Advantage Certified Debt Specialists can help you explore your debt settlement options. Call 866-481-1597 to speak with one of our Debt Specialists today about your particular situation and get a free savings estimate.
