This tax season is already proving to be different from previous tax seasons due to a recent announcement from the IRS. The announcement detailed a new start date for the 2021 tax season, which would traditionally be expected to begin in late January. Instead, the 2021 tax season is expected to begin on February 12; though this might initially be surprising to some, it will occur with good reason.
Traditionally, the beginning of the American tax season signifies the time at which the IRS will begin accepting and processing tax returns from the previous year. The reason why this is important for Americans is that tax refunds cannot be issued until tax returns are submitted. Tax refunds can be the form of cash that many Americans rely upon in order to fill certain financial gaps, and lots of people are reliant upon them. They're especially reliant upon them in tough economic times. COVID-19 has presented an unprecedented financial crisis for Americans, and therefore the contributions coming from tax refunds are more important now than ever before.
But there is a reason for this delay. The IRS is not only responsible for processing income tax returns. They have also been responsible for processing and issuing the stimulus checks that so many Americans have needed in order to survive. The second round of stimulus checks are still being processed right now, and President Biden has indicated that he wishes to issue a third round of stimulus checks. These checks are all a part of bigger COVID-19 relief packages, which required the implementation of new laws.
On December 27, 2020, new tax laws were put in place, specifically; this means that there hasn't been enough time for the IRS to fully test and program their adjusted systems. One major reason for a delay too is that not everyone received their second round of payments. Those people may be eligible for a rebate when they file for their income taxes. If people began filing their income tax returns before the IRS was prepared to handle issues like these, there would actually, in some cases, be even more of a delay in processing income tax returns. Conversely, if these changes are not properly implemented, people will not be able to receive their rebates.
Understanding The Timeline Of Refunds
As previously mentioned, many Americans are in great need of their tax refunds. They need their refunds to come through as quickly as possible, and some people even plan certain financial decisions around their expected income tax returns. Some people may use them to pay rent or their mortgage, or perhaps child support, which a non-custodial parent will have to pay until their child turns 21 years old. But the timeline of the tax refunds will be thrown off this year, and people should prepare for that. Additionally, the more prepared they are, the easier it will be for them to do what they can to speed their tax refunds along.
One of the best moves that individuals can make to ensure that they receive their tax refunds in a timely manner is filing electronically. Even if an individual is used to filing with paper and believes that filing electronically will take more time for them, they should choose that option. While it may take them more time to fill out that option, the speed through which electronic processing works will ensure a faster tax refund. For this same reason, individuals should choose to have their tax refunds direct deposited in their bank accounts. Not only will this ensure that they get their refunds more quickly; it will also ensure that their stimulus checks are direct deposited in turn.
People should also begin filing their income tax returns as quickly as possible. There is no need for them to wait until February 12 to begin filing. Rather, they should start working with software companies to begin filing their income tax returns. The software will file the tax return automatically, as soon as the start date is triggered. Additionally, software can often save an individual's tax return information over the years, making it easier for them to file every time. Although the typical American will move around 12 times in their life, resulting in them needing to update their addresses on their income tax returns, other aspects can be saved on tax return software.
Unfortunately, a delay is likely for tax refunds regardless of how quickly individuals choose to file. The IRS is overloaded with the new laws and regulations surrounding the COVID relief packages and stimulus checks. As previously mentioned, a third round of stimulus checks is rather likely. While typically speaking, these tax refunds will be deposited or sent to the recipient within 21 days of them electronically filing, this time the processing could take weeks more. Furthermore, the 21-day estimate is dependent on an individual's tax return being without issue. When a tax return is problematic, it will naturally take more time to process, and therefore it will take more time for the individual filing the return to receive their tax refund.
There are other delays to consider as well. By law, the IRS is currently prohibited from issuing tax refunds that involve the Earned Income Tax Credit or the Additional Child Tax Credit before the middle of February. Tax returns can also get somewhat more complicated if individuals are subject to taxes that not everyone else would typically be subjected to. For example, married couples that own estates worth over $10,860,000 or individuals with estates worth $5,430,000 would typically be subject to real estate taxes.
Right now, the deadline for submitted a tax return is April 15, though that deadline could be extended as it was in the previous year. No matter what, people need to be prepared and ready to submit their tax returns early.