Every American knows what April 15th means, and if you are like me, dreads the day every year. However, this year the IRS announced that it would delay the IRS tax filing deadline for the second consecutive year. Although it is not as long as the previous extension, this year taxpayers have until May 17 to complete their returns and pay outstanding levies. Many are grateful to have the extra time to sort through the confusion caused by the pandemic, including the IRS itself. But the most important question is…how will the extension affect you?
IRS Tax Deadline Delayed to May 17
The IRS just announced that taxpayers have till May 17 this year to file their returns. That means you have an extra 32 days to complete your paperwork or consult with your financial advisor about your taxes. If you are mailing it in, you must postmark it by midnight to avoid penalties. For those filing online, you will receive an electronic acknowledgement by email once you complete it.
This delay only applies for the year of 2020. For individual taxpayers, including those who are self-employed, first quarter estimated payments are still due on the regularly scheduled dates. Furthermore, it will not affect anyone who already applied for the October 15 extension.
Reasons for the Delayed Tax Deadline
The American government recognizes that the last year has been full of financial uncertainties for everyone. So, the IRS delayed the tax filing deadline for 2020 to provide extra time to “navigate the unusual circumstances related to the pandemic.” Since many taxpayers are dealing with filing questions they have never encountered before, both accountants and lawmakers called for an extension of the IRS tax filing deadline as well. As many prepare their returns, there will be many lingering questions that will require guidance from the IRS.
However, if you have tried contacting someone at the IRS, you likely had to wait a very long time to talk to someone. This is due to the fact that their operations have been severely scaled back. And let’s not forget that in addition to its usual workload, it has also been issuing the next round of stimulus checks as well. In short, its offices have been understaffed and overwhelmed.
The extension of the deadline gives the IRS more time to process the massive amount of paperwork and calls they are handling. Not only will there be more complicated returns this year, but the IRS is also still processing remaining returns from 2019. There are an estimated 24 million returns still waiting to be logged. Furthermore, there is also an increased number of refinanced mortgages, estate, trust, and final returns. With new changes in the tax laws taking effect from December 27, 2020, this year is shaping up to become one of the most trying years for the IRS in recent memory.
How the Tax Deadline Affects You
No actions are required to take advantage of the new deadline. Every taxpayer automatically qualifies for the extension. Therefore, you will have an extra month to sort through the confusion and straighten out any problems you come across. Whether you are dealing with stimulus payments or waiting for updated forms, the extension offers you some breathing room. It also allows more time to raise funds you owe or get professional advice if necessary. This is especially good news for small business owners and the self-employed who have been among the hardest hit this tax season.
Claiming Exemptions and Deductions
Others are waiting to receive updated forms to ensure they file correctly under the new changes. For some, this means this will have to resubmit returns to claim additional deductions or exemptions. One of the most significant changes is the exemption for up to $10,200 of jobless benefits. Keep in mind this only applies at the federal level. Each state will have their own laws they determine on a case by case basis. While most are likely to adjust their deadlines as well, you should monitor the situation so you do not end up filing late if your state does not extend it.
Missing Stimulus Payments
There is another good piece of those who need to address issues with their stimulus payments. If you never received your stimulus checks, or need to contest the amount deposited, now is your chance. You can claim the missing funds on your 2020 tax return.
If the IRS owes you money, you will need to find the Recovery Rebate Credit. You can find it listed on line 30 of the 1040 and 1040-SR Forms. This line lets you claim the missing checks or the discrepancy in the amount actually deposited. Once you enter this information, it will either increase your refund or deduct from any money you owe the IRS.
Another thought on everyone’s minds is if the IRS will consider additional extensions as the pandemic continues. The IRS has the authority to extend the deadline even further without Congressional approval though if they deem it necessary. Last year taxpayers had until July 15 to file. However, this caused many difficulties for businesses whose fiscal year ended June 30. So, when it comes to the question of a similar extension this year, your guess is as good as anyone’s. Although it does not appear to be necessary at this time, it is definitely a possibility.
It is important to note that even if you file for a longer extension, you must still pay 90% what is owed by May 17 or face late payment penalties. The new filing date does not exempt you from paying taxes, but rather delays the inevitable. As the IRS finishes distributing stimulus checks and processing tax returns, they still urge you not to wait. They have even issued guidelines to help speed everything along so you can get your money faster. Deadlines have a tendency to creep up on you, so do not wait until the last minute or count on additional extensions to file your 2020 tax returns.