Many Americans have an extra month to file taxes. Why you might want to stick to the original deadline
The IRS recently extended the filing deadline for individual tax returns from April 15th to May 17th.
You may still want to submit by the original date.
This is because the renewal only applies to individual tax returns from taxpayers who file an IRS Form 1040. For those making estimated tax payments, including the self-employed or those with certain small businesses, the first quarterly amount is due on April 15th.
In addition, the IRS has not yet given any further guidance on whether other time limits will also be extended. This includes contributions to individual retirement accounts and health savings accounts.
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And while accountants and self-submitters may feel less stressed after extending the deadline, given the complicated year and tax regime changes in the off-season, it’s probably a good idea to avoid a penalty or leave money on the table.
“Just because the deadline is extended doesn’t mean you have to wait until May 15 to get it all together,” said Anjali Jariwala, certified financial planner, certified accountant and founder of Fit Advisors in Torrance, California.
Contributing to an IRA or HSA
Currently, April 15th is still the last day to contribute to an IRA or HSA for 2020. The IRS has not announced that it will move the date to align with the tax return filing deadline.
The deadline for depositing into such accounts is especially important for people whose 2020 gross adjusted income may be close to the ceilings for the most recent economic reviews. If you’ve made a little more than the limit on a full check, or you might not get one because you’ve passed the exit window, a retrospective contribution to an IRA or HSA will lower your 2020 gross adjusted income and could qualify you for a payment.
$ 1,400 full checks are sent to individuals with gross adjusted income of up to $ 75,000 in 2020, heads of households up to $ 112,500, and married couples who jointly file an application for up to $ 150,000.
For those who earned more in 2020, the exit is quicker. The cap on each payment is $ 80,000 for individuals, $ 120,000 for heads of household, and $ 160,000 for married couples.
Taxpayers under the age of 50 can contribute $ 6,000 to an IRA for 2020, and taxpayers over 50 can contribute $ 7,000. Individuals with auto insurance from a high deductible health plan could save up to $ 3,550 in 2020. Families could save up to $ 7,100, and those 55 and older could contribute an additional $ 1,000 per year.
Even if the deadline for this is postponed, it is worthwhile for taxpayers to investigate now whether they are making such contributions.
“You should look into this sooner rather than later because the IRA contribution period does not include any extensions. So it will stay on either April 15 or May 17, but not beyond,” said Luis Rosa, CFP and enrolled agent founder of Build a Better Financial Future in Henderson, Nevada.
Timing of a stimulus check
For many Americans, getting a tax refund is one of the biggest problems of the year. Those hoping to get theirs as soon as possible should file sooner rather than later so the IRS can process your return and send the money.
Additionally, families and individuals severely affected by the coronavirus pandemic may not want to wait to be submitted. Filing taxes for 2020 is the only way to claim stimulus payments that you could get based on last year’s income.
Just because the deadline is being extended doesn’t mean waiting until May 15 to get it all together
CFP, CPA, Founder, Fit Advisors
“If your income was down in 2020 from 2019, or if you had a child, it would probably be in your best interests to file your taxes sooner rather than later,” said Mandi Woodruff, chief consumer advocate at Ally. “Stimulus payments are typically based on your gross adjusted income from your past return, and you may have new tax breaks this year, such as the recent expansion of the child tax credit.”
And while the IRS has postponed the filing deadline for federal returns, many state deadlines for local taxes have not been extended. For some Americans, it may make sense to file both returns at the same time before the IRS due date.
Extra time could mean extra help
Of course, the IRS can extend other time limits to match the new filing date, as it did last year. In some cases, waiting to be submitted can help some qualify for the final round of stimulus reviews.
If you received Stimulus Checks in 2019 but made more money in 2020 and are therefore no longer eligible, you will want to wait to receive your payment before submitting it. The IRS will use 2019 income and not reclaim the payment if it sees you are ineligible in 2020.
Those who had unemployment income in 2020 may also want to wait, according to Rosa, especially to file their government returns.
“It is worth waiting to see if your state also follows the IRS guideline not to tax the first $ 10,200 in unemployment benefits,” he said, adding that doing so would also lower the taxes due or increase a refund.
If you want to use the extra time to your advantage, you can file your tax return with a tax advisor and make sure you don’t leave money on the table, according to Adam Markowitz, a registered agent for Howard L. Markowitz, PA CPA in Leesburg, Florida .
According to the agency, the IRS had received more than 66 million returns by March 12. Of the more than 63 million submitted electronically, more than 34 million, or around 54%, were self-prepared.
“That’s a terrible number for me,” said Markowitz. “There are literally probably hundreds of millions, if not billions of dollars of money sitting there that people just have no idea they can go and get.”
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