Due to the COVID-19 pandemic, one of the major initiatives the Federal Government enacted to help alleviate financial stress was pushing Tax Day back by three months, from April 15 to July 15. So what this means is that you now have until July 15 to file and pay your federal taxes, without needing to file for an extension. But should you wait to file? The answer may surprise you. In this article, we’ll cover when you should file your taxes in 2020.
When to do Your Taxes in 2020
If you haven’t filed your 2019 taxes yet due to financial or personal reasons, or are expecting to owe taxes, waiting to file until the new deadline might be a good idea for you. In contrast, if you expect a refund on your tax return, there are a few reasons why you might want to consider filing now if you can.
If you’ve already filed your 2019 tax return, you can read more to learn how you can track the status of your refund check and what financial decisions you should weigh with the funds from the refund.
Reasons You Might Want to File Your Taxes Now
1. Tax Refund Comes Sooner
For individuals and families expecting to receive a refund, filing their federal tax returns sooner rather than later may be a good option. In this uncertain economic environment, extra cash can be used to help build emergency funds (which should be kept in a safe, liquid account with limited withdrawals and deposits like Personal Capital Cash), or pay down high interest debt.
2. Stimulus Check Requirement
Signed into law on March 27 and making its mark as the largest emergency relief bill in United States history, the Coronavirus Aid, Relief, and Economic Security Act (CARES) allows qualified individuals to receive a stimulus check of a maximum amount of $1,200.
In order to qualify for a stimulus check, the main requirements are to have a Social Security number and to have filed a tax return for 2018 or 2019. If you did not file a tax return because you had no income or made below the minimum requirement in 2018, but can file for 2019, you should submit your 2019 tax return as soon as you are able to in order to receive your stimulus check. Stimulus checks will come to you either through direct deposit (if accurate banking information is submitted to the IRS) or via direct mail.
3. You Have the Current Funds to Pay Your Taxes
With how unpredictable the coronavirus has been, it’s uncertain how the economy will look in both the near-term and the long-term. With unemployment rising and many people afraid of losing portions of their income, filing your taxes and either receiving a refund or paying off what you owe right now may help alleviate future financial stress that could arise due to job losses, additional debt, or other emergencies.
4. Are You in Need of a Loan?
Many people may still be in contact with loan providers for various reasons such as for home purchases, personal loans, or for their business. Lenders set requirements for what documentation they need, which often requires tax returns to verify income as part of the auditing process. A common practice is for lenders to ask for the last two years of tax returns, so it may be a good idea to file your taxes now if you foresee a bigger purchase that will require a loan in the near future.
5. Federal Requirement
Just because Tax Day is delayed doesn’t mean you won’t have to file and pay later. It may be emotionally tempting to put off your tax filing until July 15 comes closer, but if you’re filing is relatively simple to prepare and you don’t expect to owe any money, getting it done now will let you check it off your “to-do” list.
A Final Friendly Reminder
Individuals or married filers that run into any issues and are in need of a filing extension can use the IRS’ free-file service and file a Form 4868. As a reminder, this extension will still require filers to pay their estimated taxes by July 15 if they do not want to incur a late payment penalty, but will extend their official filing date to October 15.
Suggested Next Steps for You:
- Sign up for Personal Capital’s FREE financial tools to track your spending and saving, and monitor your emergency fund.
- Download our FREE guide to tax-efficient investing, “5 Tax Hacks for Investors”
