Personal Finance Coach: Did You Earn Less in 2020? A Step-By-Step Guide to a Bigger Tax Refund

With tax season starting on Friday, February 12, 2021, you’ll soon be able to file taxes and get that much-needed refund in your hands. Remember, the deadline to file is still April 15, 2021.

As we recently wrote, widespread unemployment in 2020 threatens millions of low-to-moderate income workers with up to 80 percent lower refunds for the Earned Income Tax Credit (EITC) and the Childcare Tax Credit (CTC) this year.

But thanks to a new “lookback” provision, tax filers who earned less in 2020 than in 2019 can use either their 2019 or 2020 income when filing this tax season, whichever yields the biggest refund. Note: only people who had less income in 2020 (compared to 2019) qualify for the lookback.

EITC and CTC are among the federal government’s largest anti-poverty programs for working families, lifting 5.6 million people out of poverty, including 3 million children in 2018.

We’ve put together a step-by-step guide to make sure you get the biggest refund possible, whether claiming EITC and CTC and filing yourself or using a tax preparer.

Before you file, make sure you or your tax preparer have access to your 2019 tax return! Don’t have access to it? Click here to learn more about how to get it.

Want to file your taxes for free? Check out the IRS Free File partners or speak with a tax expert at a Volunteer Income Tax Assistance (VITA) site.

Unsure if you qualify for EITC or don’t usually file taxes? Check out the IRS’ EITC Assistant to find out if you’re eligible and how much money you could receive.

Have additional questions? Talk to a TrustPlus personal finance coach for free.

To see whether using 2019 or 2020 income yields you a bigger refund take the following steps at an IRS Free File partner of your choice:

  • Step 1: 2020 EITC info — Enter all of your 2020 income information and write down or snap a picture of your estimated refund.
  • Step 2: 2019 EITC info — Return to the Tax Credit section, select EITC, select the option to input your 2019 income information. Input your 2019 income information. Write down or snap a picture of your new estimated refund amount. If you don’t see the option to enter in 2019 income information, ask customer service to help you locate the “2019 lookback option for tax credits!”
  • Step 3: 2019 CTC info — Return to the Tax Credit section, select Child Tax Credit, select the option to input your 2019 income information. Input your 2019 income information. Write down or snap a picture of your new estimated refund amount. If you don’t see the option to enter in 2019 income information, ask customer service to help you locate the “2019 lookback option for tax credits”!
  • Step 4: Select bigger refund — If your refund went up after using 2019 income, then keep it!

To ensure your tax preparer gets you the biggest refund possible, take the following steps:

  • Step 1: Find a tax preparer service. For preparers near you, check out The IRS’s Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs which offer free basic tax return preparation to qualified individuals including people who generally make $57,000 or less, people with disabilities, and limited English-speaking taxpayers.
  • Step 2: Confirm awareness of the tax “lookback” rule with your preparer before they file your taxes.
  • Step 3: Ask them to check whether your 2019 or 2020 income will yield a bigger refund. If they don’t know about the “lookback” rule, look for another tax preparer who does.

Every dollar counts. Be sure to file your taxes, use the “lookback rule,” and don’t miss out on a potentially bigger refund!

Download a PDF of the Step-by-Step Guide

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
TrustPlus

TrustPlus

46 Followers

TrustPlus is a financial wellness benefit that eases everyday money worries with personal coaching and action-oriented tools and products.