Though many Americans are required to file a tax return, some people are exempt. If you're a lower earner, for example, you may not be required to file a return. But for this year, in particular, that's a move you might regret.
Why filing a 2020 tax return is essential
There are several tax benefits available to lower-income tax-filers. But if the IRS doesn't know you're entitled to that money, it won't pay you. And the way to let the IRS know is to file a tax return.
Take the Earned Income Tax Credit, or EITC, for example. That credit could be worth up to $6,660 depending on how many children you have in your household. And also, that credit is fully refundable, which means the IRS will pay you that money if you don't owe any taxes at all. But if you don't claim that credit on a tax return, you won't benefit from it.
Then there's the Child Tax Credit. That, too, could put money back in your pocket even if you don't owe taxes -- provided you file a return.
Now another thing you should know is that the recently signed $1.9 trillion American Rescue Plan -- the same relief bill that put $1,400 stimulus checks in Americans' pockets -- expanded both the EITC and Child Tax Credit. Specifically, the EITC is now worth more for workers without children, and there's a higher income threshold at play that makes it easier to qualify for. Similarly, the Child Tax Credit is increasing from $2,000 to $3,600 for children under the age of 6 and $3,000 for children aged 6 to 16. And half of that newly expanded credit will be paid in monthly installments beginning in July. But again, you need to file your taxes to get it.
Finally, if you never received a stimulus payment in 2020, at this point, your only option for getting that money is to claim the Recovery Rebate Credit on your 2020 tax return. And since last year's stimulus payments totaled $1,800 across two rounds, that's a sum not worth giving up.
What to do if you need help filing your taxes
If you have an income of $72,000 or less, you're eligible to file your taxes for free. Furthermore, there are resources available for filers who need assistance. The IRS's Volunteer Income Tax Assistance (VITA) program is available to filers who earn $57,000 or less, have limited English-speaking skills, or have a disability. There's also the Tax Counseling for the Elderly (TCE) program, which you can qualify for if you're 60 or older.
The deadline to file your 2020 taxes is Monday, May 17. However, if you're late filing your taxes and you don't owe the IRS any money, there's no penalty for being tardy, so if you don't think you'll meet that deadline, don't let it deter you. Instead, do your best to complete your return as soon as you can so you can get the money you're entitled to as quickly as possible.