Many Americans hope to get money back from the IRS when they file their taxes. But this year, those rebates can be a real life saver.
Millions of people are struggling financially in the wake of COVID-19. Unemployment levels are extremely high, and many households are grappling with income insecurity as their hours and earnings have been reduced. In fact, this year more than ever, Americans may be using their tax refunds not for long-term financial goals but for immediate needs, like putting food on the table.
Americans’ plans to spend their rebates: before and after the pandemic
Before COVID-19 took over, Americans had big plans for their refunds, according to a survey by TD Ameritrade. Earlier this year, 48% of filers had planned to put tax refunds into savings, and 15% said they would use that money to buy shares.
Now only 37% say they will be able to use their redemptions for savings purposes, and only 8% plan to add to their stock portfolios. Instead, 36% of filers plan to use their tax refunds to pay for their housing expenses, while 35% say they will spend that money on utility bills.
A bad year for refund delays
The IRS has reportedly been slow to process tax refunds this year, and those filing a paper return could end up waiting months to get their money back. The reason? Paper returns must be processed manually, and at this time, the IRS is not operating at full capacity in the office due to pandemic related office closings. Anyone who has not yet filed for 2019 but is owed a refund must do so electronically this year, and those with an income of $ 69,000 or less can do so for free.
Meanwhile, delaying the tax deadline from April 15 to July 15 may have hurt Americans, as many chose to use overtime to make their returns when they should have filed months ago to get that in their hands. Extra money. However, the good news is that the IRS has confirmed that it will pay interest on overdue refunds that date back to April 15, the original filing deadline.
Generally, electronically filed tax refunds are processed within 21 days, assuming an error-free tax return. Signing up for direct deposit could further accelerate that cash.
Taxpayers who do not complete their tax returns before July 15 can request an extension and get another three months to complete them. But that, again, will only delay the rebates that so many Americans desperately need.
Filing cabinets may be better off avoiding refunds
The reason people get refunds from the IRS is because they overpay their taxes during the year. Those in financial difficulty but generally getting a substantial refund should consider adjusting their withholding for the rest of 2020. That way, they will get more money on their paychecks up front, thus avoiding a scenario where they look forward to next year. Tax refund to pay rent, buy medicine, or cover any other expenses that can only be described as essential.