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Tax Filing Due Date Extended

The IRS has extended the Federal Tax Filing deadline for individuals to May 17, 2021!

State taxes are still due April 15, unless your state changes it, or you live in a disaster relief area.

Taxpayers can also postpone their federal income tax payments for the 2020 tax year to May 17, 2021, without penalties and interest, regardless of the amount owed.

The IRS announced in addition to the extended filing date, other deadlines that would normally fall on April 15, such as making IRA and HSA contributions, would also be extended to May 17.

Tax filing season officially started on February 12 this year.  If you have procrastinated, you have more time to start gathering documents — including a copy of your 2019 tax return, W-2s, 1099s, and deduction records. You’ll need these records whether you’re preparing your own return or hiring a tax preparer.

Taxable Income

If you received interest on your delayed refund due to Covid last year, remember to report that interest as income. The IRS sent 1099-INT forms to taxpayers that received $10 or more in interest.

Unemployment Compensation is taxable and must be included gross wages on Form 1040.  Many people fail to have federal taxes withheld from unemployment benefits and are surprised with a tax bill at filing time. Because of this, the The American Rescue Plan Act includes a provision exempting $10,200 of unemployment benefits received in 2020 from taxable income. The exemption is available for taxpayers with $150k or less in taxable income.

What If You Owe?

If you find you cannot pay what you owe, file the return and pay as much as you can afford. You’ll owe interest and possibly penalties on the unpaid tax, but you’ll limit the penalties assessed by filing your return on time.  You can work with the IRS to pay the remaining balance (options can include paying the unpaid balance in installments).

Filing for an Extension

If you won’t be able to file your federal income tax return by the due date, you can file for and obtain an extension using IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.

Filing this extension gives you an additional five months (to October 15, 2021) to file your federal income tax return. You can also file for an extension electronically — instructions on how to do so can be found in the Form 4868 instructions.

Due Dates for 2020 Tax Returns

Filing for an automatic extension does not provide any additional time to pay your tax. When filing for an extension, you have to estimate the amount of tax you will owe and pay this amount by May 17, 2021. If you don’t pay the amount you’ve estimated, you may owe interest and penalties. In fact, if the IRS believes that your estimate was not reasonable, it may void your extension.

Note: Special rules apply if you’re living outside the country or serving in the military and on duty outside the United States. In these circumstances, you are generally allowed an automatic extension (to June 15, 2021) without filing Form 4868, though interest will be owed on any taxes due that are paid after the May filing due date. If you served in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file.

Expecting a Refund?

Most filers can expect their refund to be issued within 21 days of the IRS receiving the return. The IRS recommends choosing direct deposit as the safest and fastest way to receive a tax refund.  Refunds sent by check take longer to receive.

If you are expecting a refund on your 2020 tax return, consider filing as soon as possible and filing electronically.

Updated April 6, 2021

Sources:

IRS.gov

Broadridge

Posted in: Tax, Uncategorized

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