Everything You Need To Know About The New Tax Deadline
Dear Rich Lifer,
The Internal Revenue Service (IRS) has extended the deadline to file 2020 taxes from April 15 to May 17, giving both taxpayers and preparers more time to adapt to an increasingly complicated tax season.
IRS Commissioner Charles Rettig said in a statement, “This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities.”
The filing season started later than usual this year (on February 12) and has presented numerous challenges for taxpayers dealing with the year’s economic disruptions and the last minute changes to tax-law due to the recently signed American Rescue Plan — which made the first $10,200 of unemployment benefits received in 2020 tax-free for people with incomes of less than $150,000.
Lawmakers and accountants have been urging the government to intact this extension and are relieved to be receiving an additional month to complete filings.
Reps. Richard Neal (D., Mass.) and Bill Pascrell (D., N.J.) said, “We are gratified that the IRS has recognized the need and heeded our calls for additional time, and while we are pleased with this 30-day extension, we will continue to monitor developments during this hectic filing season.”
While this may seem like deja vu (remember, last year the deadline was extended to July 15), there are still many questions that taxpayers are asking.
Today, we will break down these questions for you; so we can all file our taxes this year with as little stress as possible!
All Your Questions Answered!
- Does this Change Payment of Taxes as Well?
Yes. You now have until May 17 to pay any taxes you may owe.
- Who Does the Delay Apply To?
The delay applies to individuals filing Forms 1040 and 1040-SR. It does affect deadlines for corporate, partnership or nonprofit tax returns. It also does not apply to first-quarter estimated tax payments for 2021. That deadline is still April 15, and after that date, interest and penalties will apply.
Individual taxpayers do not need to take any actions for this change to be enacted! No need to call the IRS or file any forms. The extension is completely automatic!
If you live in one of the states affected by the devastating winter storms (Louisiana, Texas or Oklahoma), this new deadline does not override the already enacted June 15 extension.
- How Does This Affect Contribution Deadlines for IRAs and HSAs?
One would assume that because the federal deadline has been extended, the deadline to make Traditional IRA, Roth IRA and HSA contributions will also be extended.
Some sites (such as NerdWallet) are reporting that the extension does also apply to these types of contributions.
However, this was not explicitly stated in the IRS’s press release, so we will have to keep an eye on this and will update you as soon as we have more information. You can read the full press release here if you are interested.
- What if I Still Need More Time to File?
If you need longer than May 17 to file, do not fear! You may still file Form 4868 to request an automatic extension till October 15.
Even if you file for this automatic additional extension, you still must pay what you owe by May 17, but you will have until October 15 to finish any paperwork.
- What About State Taxes?
Technically, as of now, these changes only apply to federal tax returns, not state taxes.
However, Mary Peterson, executive director of the Federation of Tax Administrators, states, “We expect most states to conform their deadlines with the new federal deadlines.”
We can all continue to check State Tax Agencies for specific state-by-state updates.
- If I Already Filed My Taxes and Scheduled an Automatic Withdrawal of My Tax Payment for April 15. Will the IRS Automatically Delay This Payment Until May 17?
No. The IRS will not do this automatically, but you can take action to change the payment if you wish.
If you have authorized electronic funds to pay taxes owed, you can cancel payments by calling the U.S. Treasury Financial Agent at 1-888-353-4537. Payment cancellation requests must be made by 11:59 p.m. EST two business days before the scheduled payment date. You must then reschedule the automatic payment or mail a check to the IRS.
If you use IRS Direct Pay or the Electronic Federal Tax Payment System (EFTPS), both have directions for canceling payments. For IRS Direct Pay, use the Look Up a Payment Feature. For EFTPS, login and click on Cancel a Tax Payment. Again, this must be done two days before the scheduled payment.
If you scheduled a payment on a credit or debit card, you must contact your bank to change the date.
- What Should I Do if I Received Unemployment Benefits but Already Filed My Taxes?
Mr. Rettig is strongly urging taxpayers who have already filed their 2020 to refrain from amending them to take advantage of the recent tax-law updates. Rettig stated last week that the IRS will automatically send refunds to those who qualify.
If you have not yet filed your taxes and received Unemployment Benefits and are still confused, we don’t blame you. The constant changes have been incredibly hard to keep track of. Filing your taxes can be hard enough, so the IRS has released a new guideline and worksheet that will walk you through how to claim the exemption.
- Are There Other Final Changes to Look Out for?
Treasury officials reported they are working with the IRS to develop a new online portal to disperse advanced payments for the expanded Child Tax Credit, which will provide up to $3,600 per child under age six and $3,000 for children ages six to 17, regardless of whether a family earns enough to pay income taxes.
The portal will allow you to upload relevant data for midyear payment adjustments, such as the birth of a child.
Again, this is still in the works, so there will be more to come on this in the future.
I hope we can all breathe a collective sigh of relief after gaining some clarity on this convoluted tax season and if you’re still in the process of filing, check out our piece on legally shrinking your taxable income!
To a Richer Life,
The Rich Life Roadmap Team