WEEKLY TAX TIPS
TAX DEADLINE EXTENDED
I’m sure that most everyone has heard that the tax deadline has been extended again this tax filing season but there are some significant changes from the extension we were granted last year so be sure you know if the extension affects you.
Last month the IRS announced that the tax deadline has been extended from April 15, 2021 to May 17, 2021 (May 15th is on Saturday). This extension is limited to individual taxpayers filing Form 1040, and the extension only applies to tax year 2020 fling. This means that your Form 1040 (and most state income tax returns) has a filing deadline of May 17th. As long as you file your 2020 return and pay the tax due with the return by May 17th, you won’t be charged any interest or penalties (some states, including North Carolina, have waived penalties but NC says that interest will be charged on any state tax payments made for tax year 2020 after April 15th). State rules and filing dates may differ so check with your state for those rules.
Many taxpayers make contributions to traditional IRA’s, Roth IRA’s, and Health Savings Accounts (HAS’s). Those payments can normally be made by the unextended due date of the tax return. Since the due date has been moved, these payments can now be made by May 17th and qualify for the 2020 tax return.
A major complication for many taxpayers is that they pay estimated tax payments toward their tax liability. The first estimated tax payment for 2021 is due April 15th and that date has not been extended. If you normally make estimated tax payments, we recommend that you make the first payment by April 15th.
Many taxpayers are used to extending their tax return with a payment designed to cover their prior year’s tax liability and an additional amount that would be applied to the current year’s first estimated tax payment. While it is unclear, current thinking is that this strategy may not adequately cover your first estimated tax payment if you make the extension payment after April 15th. The IRS has indicated that they intend to treat payments made after April 15th intended to be for the first 2021 estimated tax payment as late and subject to interest charges. Congress has indicated a desire to make estimated tax payments be due on May 17th, along with the 2020 tax deadline, but if you want to be sure you aren’t charged interest you will need to make your first estimated tax payment by April 15th.
For most taxpayers your situation is simple – your due date to file and pay your 2020 taxes is May 17, 2021 and you as long as you file by that date, it’s no different than filing by April 15th in previous years. If you have questions about any of the nuances of the deadline, please contact our office. As I said earlier, there are still some unanswered questions, but we’re happy to help you navigate your particular situation.
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At Faw & Associates, we are always available to answer any of your tax or financial planning questions. You can get more information on this or many other topics at our website – www.fawandassociates.com or you can contact us directly by calling our office at (336) 838-3080. You can also email me at email@example.com any time with your question or concern.