The deadline to file your taxes rolls around every year on or about April 15. If you fall into the group of individuals who wait until the deadline to file, you may be relieved to hear that the tax deadline has been extended this year. Read on to see when the new deadline is and how this extension affects you, whether you like to file early or later.
Tax Deadline Extended
Due to the COVID-19 pandemic currently affecting the United States, the tax deadline to file and pay your 2019 federal income taxes is extended to July 15, 2020. It’s important to note that this is for both filing and paying. Originally the IRS announced the deadline extension was only for payments due, but now it includes filing. This is an extra three months to file federal taxes only. The extension until July 15 is automatic and you do not need to file anything to take advantage of it. If you will owe money you will not incur any interest or penalties until after the July 15 deadline.
If you live in a state with state income tax you will need to verify the deadline for state income tax returns with your state. A majority of the states have extended their deadlines to match the federal deadline, however some are sooner. Check with your state’s Department of Revenue to verify the deadline.
How the Tax Deadline Extension Affects You
Longer Time to File
Are you a healthcare worker who is spending extra hours at work and you do not have the time to focus on filing taxes? Or maybe you are working from home and juggling homeschooling your children during this pandemic. Now that the deadline has been extended you have extra time to gather all the documents you need to file your taxes and take the time to complete the filing. Tip: To make gathering documents less of a pain next year, label a folder Taxes and the year and stick any receipts and tax documents you receive throughout the year in it.
The extension is also beneficial for many people who use tax services to complete their returns. It’s estimated that 37% of filers use a tax preparer to file their taxes. If you are not able to leave your home, it may not be possible at this time to meet with a tax preparer to complete your return. This extension will allow you to meet with a tax preparer at a more appropriate time.
Longer Time to Pay
If you think you will owe taxes, you will have a longer time to pay. For people that may be unemployed at this time or receiving reduced income, this is a major benefit. But if you expect to receive a refund, try to file earlier so you can collect the money you are owed. If you file electronically you can expect your refund within 3 weeks. Note: Any tax refund owed to you is different from the government stimulus check eligible individuals are expected to receive in 2020.
Extension Still Allowed
In any given tax year you can file for an extension to file your taxes later. This still applies in 2020 for the 2019 tax year even though the tax deadline has been extended. You must file for an extension by July 15, 2020 and then you would be able to file your tax return by October 15, 2020. However, this does not give you additional time to pay. In order to get the extension, you must estimate any amount of taxes you owe and pay them by July 15. Failing to pay the estimated taxes could result in penalties.
Extra Time to Save
IRA and Health Savings Accounts have maximum contribution amounts each year. The deadline to have contributions count for the previous year is normally April 15. However, since the tax deadline has been extended, the deadline to save in these accounts has been extended as well to July 15. So if you have the goal to max out your account each year, but did not quite make it for 2019 the extension allows you to use the extra time to save up to the maximum amount.
For example, the 2019 contribution limits for IRAs is $6,000 if you are under 50 years of age and $7,000 if you are over 50 years old. If you are under the age of 50 and have only saved $5,000 in your IRA in 2019, you can contribute an extra $1,000 by July 15 and add it as a contribution for 2019. This would allow you to still add up to the maximum amount for 2020 in your IRA as well. Note: Just make sure when you are making a contribution for 2019 that it is marked as a contribution for that year. You can do this through an online portal or by calling your plan administrator.
Self-Employment Taxes
If you are self-employed or have a side hustle as a freelancer you should be used to paying estimated quarterly taxes. This is when you send tax payments in quarterly for income that does not have taxes withheld. It may come as a nice benefit this year that the deadline for estimated quarterly taxes has also been extended. The deadline for the first quarter, normally due on April 15 is now extended to July 15, 2020. The deadline for the second quarter, normally due on June 15 is also extended to July 15.
Bottom Line
Although the deadline to file federal income taxes has been extended, if you are expecting a refund it may be more advantageous to file earlier so you can receive the money that is due to you. The sooner you get the money, the sooner you can use it to pay down your student loan debt or pad your emergency fund. No matter when you decide to file, just remember you must file a return or request for extension by July 15, 2020!
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