The IRS recently extended the filing deadline for individual tax returns to May 17 from April 15.
You may still want to file by the original date.
That's because the extension only applies to individual returns, from taxpayers who file an IRS Form 1040. For people who make estimated tax payments, including the self-employed or those with certain small businesses, the first quarterly sum is still due April 15.
In addition, the IRS has not yet given further guidance on whether other deadlines will also be extended. That includes contributions to individual retirement accounts and health savings accounts.
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And, while accountants and self-filers might be feeling less stressed now that the deadline is extended, the complicated year and changes to tax rules midseason mean that starting earlier is probably a good idea to avoid either facing a penalty or leaving money on the table.
"Just because the deadline is extended doesn't mean to wait until May 15 to get everything together," said Anjali Jariwala, a certified financial planner, certified public accountant and founder of Fit Advisors in Torrance, California.
Contributing to an IRA or HSA
Currently, April 15 is still the last day to contribute to an IRA or and HSA for 2020. The IRS hasn't said that it will push back the date to align with the tax return filing deadline.
The deadline for contributing to such accounts is especially important for people whose 2020 adjusted gross income may be close to the caps for the latest stimulus checks. If you made slightly more than the limit for a full check or might not get one because you're over the phase-out window, making a retroactive contribution to an IRA or HSA will lower your adjusted gross income for 2020 and could make you eligible for a payment.
Full $1,400 checks are being sent to individuals with up to $75,000 in 2020 adjusted gross income, heads of household with up to $112,500 and married couples who file jointly that have as much as $150,000.
For those who made more in 2020, the phase-out is faster. The upper limit for any payment is $80,000 for individuals, $120,000 for heads of household and $160,000 for married couples.
Taxpayers under age 50 may contribute $6,000 in an IRA for 2020, and those over 50 can contribute $7,000. Individuals with self-only coverage from a high-deductible health plan could sock away up to $3,550 in 2020. Families could save up to $7,100 and those aged 55 or older can contribute an extra $1,000 for the year.
Even if the deadline for these is pushed back, it's worth it for taxpayers to investigate making such contributions now.
"They should be looking at it sooner rather than later because the IRA contribution deadline does not include extensions, so it's either going to stay at April 15 or May 17, but not beyond that," said Luis Rosa, a CFP and enrolled agent and founder of Build a Better Financial Future in Henderson, Nevada.
Timing a stimulus check
For many Americans, a tax refund is one of the biggest windfalls of the year. Those hoping to get theirs as soon as possible should file earlier rather than later so the IRS can process your return and send the money.
In addition, families and individuals hit hard by the coronavirus pandemic may not want to wait to file. Filing 2020 taxes is the only way to claim stimulus payments you were eligible to receive based on last year's income.
Just because the deadline is extended doesn't mean to wait until May 15 to get everything togetherAnjali JariwalaCFP, CPA, founder, Fit Advisors
"If your income decreased in 2020 from the 2019 levels or if you've had a child, it probably would be in your best interest to file your taxes sooner rather than later," said Mandi Woodruff, chief consumer advocate at Ally. "Stimulus payments are typically based on your adjusted gross income from your most recent return, and you may be able to take advantage of new tax benefits this year, like the recent child tax credit expansion."
And, while the IRS pushed back the filing deadline for federal returns, many state deadlines for local taxes have not been extended. It may make sense for some Americans to file both returns at once before the IRS due date.
Extra time could mean extra help
To be sure, the IRS may still extend other deadlines to match the new filing date, as it did last year. And, there are some instances where waiting to file may help some qualify for the latest round of stimulus checks.
If you got stimulus checks in 2019 but made more money in 2020, making you ineligible, you'd want to wait to get your payment before filing. The IRS will use the 2019 income they have and won't claw the payment back when they see you'd be ineligible in 2020.
Those who had unemployment income in 2020 may also want to wait, especially to file their state returns, according to Rosa.
"It's worth waiting to see if their state will also follow the IRS guideline of not taxing the first $10,200 of unemployment benefits," he said, adding that this would also lower any tax due or boost a refund.
If you do want to use the extra time to your advantage, you could take your return to a tax filer and make sure you aren't leaving money on the table, according to Adam Markowitz, an enrolled agent with Howard L Markowitz PA CPA in Leesburg, Florida.
The IRS had received more than 66 million returns through March 12, according to the agency. Of the more than 63 million that were electronically filed, more than 34 million, or about 54%, were self-prepared.
"That is a terrifying number to me," said Markowitz. "There's literally probably hundreds of millions if not billions of dollars of money that's sitting there that people just have no clue that they can go and get."
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