One year into the pandemic, Americans are continuing to strike a balance between staying safe and handling their day-to-day responsibilities. One major challenge we all face this time of year (pandemic or no pandemic) is filing our taxes on time.
On March 17, less than one month until Tax Day, the IRS announced an extension for the 2021 tax filing season. Here’s what you need to know about filing your 2020 taxes.
2021 Deadline Extension
The IRS has announced that the tax filing deadline will be pushed back one month, until May 17, 2021.
The delay follows continued disruption from COVID-19. As a reminder, we saw a delayed start to the 2021 tax season as well. While tax season typically begins on the first of the year, the IRS delayed the start until February 12.
As a reminder about tax extensions, there will no late penalties or fees for tax returns filed up through May 17, 2021 - regardless of how much you may owe. To receive your refund in a timely manner, the IRS recommends filing electronically and setting up a direct deposit.
While this extension isn't unexpected, it may be a welcomed change to many still coping with what is becoming one of the most complicated tax seasons in decades.
Why was the deadline extended?
According to a statement released by the IRS, "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."1
In addition, the American Rescue Plan Act passed in early March, promising eligible Americans $1,400 stimulus payments. The timing of this legislation is tricky, as it fell right in the middle of tax season - many Americans have already filed, while many others haven’t. Because the stimulus payments are actually considered tax credits, any indiscretions or missing payments were initially meant to be resolved when a tax return was filed. It’s possible the extension of the tax filing deadline could, in part, have to do with helping eligible Americans receive or request their latest stimulus payment - although this reason was not specifically given by the IRS in their official statement. If you're concerned about receiving your stimulus payment, your CPA can answer any questions you may have regarding that process.
Of course, the IRS only controls the Federal income tax system. While they have extended the deadline to file your 2020 Federal tax return, some states may still expect your state tax return to be filed by April 15th.
On March 19th the Minnesota Department of Revenue posted on their website that they will give taxpayers until May 17th to submit their returns and pay their state income taxes without penalties or interest. Residents of other states should check with their state revenue department for details regarding their particular state.
IRA deadlines have also been extended
If you are considering an IRA or Roth IRA contribution for 2020, you now have until May17 or when your tax return is submitted to fund your account.
If you have specific questions regarding the new tax deadline and how that may affect your 2020 returns talk to your tax professional or CPA.
To discuss any of the topics in this blog or to learn more about how we can help you Cross The Bridge To A Confident Retirement, please contact me through my web site mikebranch.net, call me directly at 651-379-3935 or email me at mpbranch@focusfinancial.com.