Experts weigh in on how stimulus checks might impact your taxes
SOUTH BEND, Ind. -- As we enter March some might have spring on the mind, others might be thinking…taxes. 2020 was an interesting year filled with extensions and stimulus checks. Now, as you file those 2020 taxes here in 2021, what can you expect?
Despite efforts from the American Institute of CPAs for an extension, this year’s deadline to file your taxes is April 15th. After a financial troubling year, some people currently might not have the funds available to pay your tax bill by the 15th. Even so, experts say do not put off filing. The IRS charges penalties and interest starting the day the return is due. Rather, file as soon as possible, and pay as much as you can. Then, you can set up an installment plan for balance.
However, keep in mind, taxes are all based on personal situations. Therefore, the best option is to talk to an expert. Listening to friends or relying on self-help for your personal situation could result in mistakes and ultimately more trouble.
“Friends or family might be telling them something that is true but it might not be true in their situation. Because every tax scenario has a facts pattern that goes with it, and if you are told by someone who does not know the fact pattern of your case, it can probably be a mistake to rely on their advice,” William Hanna, owner of William R. Hanna CPA.
Hanna also explains plan ahead! If you experience a big life event such as an inheritance or sell an asset, talk to an expert as soon as you can.
“The other big mistake we see people make is if they have some life changing event that happens - they receive an inheritance, they sell an asset you know could be a number of things. They do not do any planning or seek advice on the event before the year is out. They wait until it is time to do their taxes, and there is nothing they can do in the planning to soften the tax blow or have the event turn out better on their tax return,” says Hanna.
What about those stimulus checks?
Two stimulus checks were sent out to millions of eligible Americans. The first check could have been up to twelve hundred dollars and was based on either your 2018 or 2019 tax return. The second, up to $600, was based on your 2019 return. However, if you experienced a job loss, or have different circumstances and did not receive a check, you still might be entitled to one. When doing your 2020 tax return, if you were expecting a stimulus check, you can claim a Recovery Rebate Credit. The IRS will include the stimulus payments as part of your refund check.
“It actually gets reconciled on their tax return when they do file tax return that there are boxes to fill in, I got the first stimulus, I got the second stimulus, I got no stimulus. Then the filing of your 2020 tax returns, if you were entitled to one and you didn’t get it, but your tax return should make that right,” says Hanna.
The IRS does have further resources for you to help clear up some confusion. Anyone with an income of $72,000 or less can file their federal tax return electronically for free through the IRS free file program. By filing electronically, it will help you figure the recovery rebate credit.
There are also volunteer prepared taxes for those who might need expert help. You can find out how to find the nearest location to you here.