- The IRS announced this year’s tax season will begin Feb. 12.
- This delay (from a typical late January start) means early filers and those claiming the Recovery Rebate Credit must wait longer to receive tax refunds and stimulus payments.
- Prepare now and file early to reduce delays.
Another confusing tax season is on its way.
The IRS has pushed the start date of this year’s tax season to Feb. 12, a delay from the typical late January start. The announcement came on Jan. 15, the agency’s deadline to distribute the latest round of $600 stimulus payments to millions of Americans.
The delay is largely due to the relief package passed in late December. It gives the IRS “time to do additional programming and testing of IRS systems following the Dec. 27 tax law changes” and “ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return,” according to the announcement.
But it also means Americans must wait even longer for the tax refunds and stimulus payments they’re owed. Many in limbo are those who need the money most.
“This is another gut-punch for folks who’ve been struggling,” says John Owens, CFP, lead planner at Brooklyn FI financial planning firm. “Lots of folks saw big drops in income last year and are waiting on their refund. And many may have been ineligible for stimulus based on their prior taxes, but will be eligible when filing their 2020 return. They now have to wait longer.”
The new administration is already taking strides to reduce that wait. On Jan. 22, President Biden signed a new executive order for economic relief asking the Treasury Department to update its process in getting stimulus payments to all eligible Americans. This includes outreach efforts for the estimated 8 million people who didn’t receive the first round of $1,200 payments, such as low-income workers who aren’t required to file taxes annually.
As tax season approaches, here are a few ways you may be affected by the IRS delay, and the actions experts recommend to help ensure you receive your refund and stimulus payment as quickly as possible:
How to Claim Your Second Stimulus Payment on Your Tax Return
Despite initial delays, a majority of the $600 stimulus payments were issued to eligible Americans. As of Jan. 8, the IRS said it had issued over 100 million payments via direct deposit; an additional 8 million were issued by mail as a prepaid debit card and paper checks were mailed up to the deadline.
Still, many Americans will need to claim the Recovery Rebate Credit on their 2020 tax return to receive their payment. This applies to many people who see a “Payment Status #2 — Not Available” message using the IRS’ Get My Payment tracker, non-filers, and those who didn’t receive the full payment for which they’re eligible due to financial changes in 2020 (payments issued so far were largely based on 2019 tax returns).
Your tax return is also an opportunity to claim any amount you’re eligible for but didn’t receive from the first round of $1,200 stimulus payments following the CARES Act last spring. The return will include a worksheet you can use to determine any amount you’re eligible to claim using the Recovery Rebate Credit.
The best way to guarantee the quickest refund and stimulus payment is to file your tax return electronically and use direct deposit to your bank account.
If you haven’t yet received your second stimulus payment, but the Get My Payment tracker shows it was sent by mail, remember: the Jan. 15 deadline was for checks to be issued, not received. It may still be weeks before you receive a paper check or debit card in the mail. But according to experts, that’s one advantage of a delayed tax season.
“Delaying the filing season should reduce some confusion on the taxpayers’ part,” says Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center.
“They say, and it seems reasonable, that people should receive their payment by Feb. 12 if they are going to get a payment,” she says. “That will reduce the confusion that might have occurred if it had begun next week. There would be these people in limbo, where their check was in the mail and they hadn’t received it, and when they went to file their tax return, they didn’t quite know what to do.”
If you’re still waiting on your payment, continue using the Get My Payment tracker for any updates, and monitor your mail for a paper check or debit card through the month.
How to Secure a Timely Refund
Delaying the traditional start of tax season may help reduce confusion among taxpayers who haven’t received stimulus payments they are eligible for, but it also means a longer wait for Americans who rely on annual tax refund payments and file early in the season, or who won’t receive any stimulus until filing their returns.
The IRS says nine out of 10 taxpayers will receive their refund within 21 days of filing — if they do so electronically using direct deposit and there are no issues with the return.
“That’s three weeks that people are out that money,” says Dan Herron, CPA, founder of Elemental Wealth Advisors in San Luis Obispo, California. But many who rely on an annual refund check, “need that money because they bank on that to pay for medical expenses, or major purchases, or just surviving at this point. That’s frustrating.”
Despite the late start, there are a few ways to ensure you receive your tax refund, including any stimulus payment you’re eligible for using the Recovery Rebate Credit, as quickly as possible.
Don’t Wait to Get Started
First, start preparing now. As of Jan. 15, IRS Free File is open. If you’re eligible, you can begin filing returns with Free File (or file with a third-party software company) and your returns will be transmitted to the IRS on Feb. 12.
“Getting started earlier puts you ahead of the game,” Holtzblatt says.
If you’re still waiting on your stimulus payment and unsure of your payment status, check the Get My Refund tracker, and continue to check your mail in the coming weeks. But if you verified your payment wasn’t sent (you received the “Payment Status #2 — Not Available” message) or you only received a partial payment, the preparation software you use (including IRS Free File) can help you determine and claim the full stimulus payment you’re eligible for.
“This really was driven home by last year’s experience,” Holtzblatt says. “File early, file electronically, and if you expect to get a refund, have that refund directly deposited into a bank account if you have a bank account.”
If you file early and request your refund via direct deposit, you should receive your payment within 21 days, according to the IRS. Once your return is filed, the IRS projects its Where’s My Refund tool will be available for you to track your refund beginning Feb. 22.
Anticipate Any Hiccups
2020 changed a lot of people’s financial outlooks, day-to-day spending, and employment. All of this can have an impact on your tax returns.
“With last year being a very different year for many taxpayers, it’s important to make sure you gather all your documents before preparing your return or going to your preparer,” Owens says. “For example, many folks don’t realize that unemployment compensation benefits are taxable and reported on a 1099. If you collected last year, be sure to have this document ready before you have your return prepared.”
Any information or documentation you can provide on the amount you’ve received in stimulus payments — whether from the first round last spring or the most recent payments this month — can also help to more accurately reconcile what you’re eligible for versus what you’ve received, Herron says.
Before speaking with your accountant or logging onto your tax filing service, gather all the documents and forms you have related to your 2020 finances. File correctly the first time so your payments aren’t delayed by errors or necessary amendments.
Get Tax Credits You’re Entitled To
The delay shouldn’t make much difference for some filers whose refunds are delayed every year, Holtzblatt says. Taxpayers who are eligible for the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) traditionally face a refund delay when filing early. Under the PATH Act from 2015, the IRS cannot issue refunds on returns claiming these credits until Feb. 15 in order to prevent identity fraud and fraudulent claims.
Even with the delayed start of tax season, the IRS says these claimants should receive refunds in early March, the same timeline as they would in a traditional filing season.
“Yes, people who need the money won’t be receiving it until perhaps late February or early March,” Holtzblatt says. “But for those people who probably need it the most, their income puts them in the range of the EITC in many cases, and their payments will get to them at about the same time as it normally would.”