American taxpayers have been slow off the mark when it comes to filing their taxes, despite the implications this could have for receiving tax refunds and stimulus payments. While the delay to the tax season meant most tax software was left untouched a little longer than usual this year, tax-filers don’t appear to be in the mindset to make up for lost time.
The House Ways and Means Committee received its first status report from the IRS in what would normally be the third week of filing season, and the “news is alarming”, noted Chairs Richard E. Neal and Bill Pascrell. “One week into a shortened filing season, the IRS reported that it received about 20 million returns on February 12, the opening day of the 2021 return filing season, and processed only 14 million,” they said. “This pace is significantly behind the nearly 40 million returns received and processed last year through February 14, 2020.”
The Chairs have requested information on why more returns aren’t going through the system, and how the IRS plans to both improve the processing of this year’s returns and cover the backlog from last year. The Chairs also note that it’s as-yet unclear why taxpayers appear to have delayed filing, but add that the data underscores their concerns about Americans receiving COVID-related financial relief, with Congress currently negotiating stimulus check 3.
Could filing season be extended?
Amid the ongoing problems posed by COVID-19, the Committee has also requested that the IRS extend the April 15 tax-filing deadline, as it did last year. In a letter to IRS Commissioner Charles Rettig, the lawmakers argued that the pandemic-related health and economic challenges that led to last year’s extension persist for a lot of taxpayers, and that many are unable to receive the assistance necessary to complete their returns. Reference is also made to the already condensed filing season which means there are just two months for returns to be filed.
Despite the pressure being exerted to give taxpayers more time, there is no suggestion that the IRS will acquiesce. Anyone pinning their hopes on an extension is therefore advised not to, in case it doesn’t come to pass; waiting too long could mean it’s more difficult to get your return in over the line, with the benefits of filing early far outweighing any reason to wait.
Why you shouldn’t delay filing your tax return
One of the key benefits of filing early is that the sooner you file, the sooner you’ll be paid your tax refund, should one be due. Most refunds are paid within 21 days of processing but many will get their rebate sooner, and if you file your taxes online – which everyone is being encouraged to do this year – you could start tracking your refund within 24 hours.
A further benefit could present itself in the form of the third stimulus check. Any such payment will be tied to your taxes, with Congress proposing that the IRS use the information included on your 2020 return – specifically your adjusted gross income – to determine the amount you’d receive. If the IRS doesn’t have your updated return, it would use your 2019 form, which could leave you with a smaller stimulus payment; if the last year has seen your income suffer or circumstances change, as it has for many Americans, you’d be wise to file sooner rather than later, in order to make sure the IRS can process your taxes before the next stimulus payment is released.
Similarly, filing early means you’ll recover any money owed to you from the last two stimulus checks much sooner than if you waited. If you received less than you were entitled to or haven’t had a payment at all, you can claim your missing stimulus payment as a rebate credit on your federal tax forms – but if you delay filing, you’re waiting longer to get that money back.