Why Some Taxpayers May Not Want To Wait To File


The IRS recently extended the deadline for filing individual tax returns from May 17 to April 15.

You may still want to apply before the original date.

This is because the extension only applies to individual returns, from taxpayers filing an IRS Form 1040. For people making estimated tax payments, including the self-employed or those with certain small businesses, the first quarterly sum is still due on April 15.

Additionally, the IRS has yet to provide further guidance on whether other deadlines will be extended as well. That includes contributions to individual retirement accounts and health savings accounts.

More from Invest in You:
Suze Orman: Don’t reverse your stimulus controls. This is what you should do
Women are more financially stressed. Here’s how to get over it
Women lag behind men when it comes to saving for retirement. Covid made it worse

And while accountants and self-filers may feel less stressed now that the deadline is extended, the bumpy year and mid-season tax rule changes mean that starting earlier is probably a good idea to avoid. face a fine or leave money on the table. .

“Just because the deadline is extended doesn’t mean waiting until May 15 to get it all together,” said Anjali Jariwala, a certified financial planner, certified public accountant and founder of Fit Advisors in Torrance, California.

Contribute to an IRA or HSA

Currently, April 15 is still the last day to contribute to an IRA or HSA for 2020. The IRS has not said it will push the date back to align with the tax filing deadline.

The deadline to contribute to such accounts is especially important for people whose 2020 adjusted gross income may be near the limits of the latest stimulus checks. If you earned slightly more than the limit for a full check or you may not get one because you’ve passed the phase-out period, 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 checks for $ 1,400 are being sent to individuals with up to $ 75,000 in adjusted gross income in 2020, heads of household with up to $ 112,500, and married couples filing joint returns that have up to $ 150,000.

For those who earned the most in 2020, the elimination 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 the age of 50 can contribute $ 6,000 to an IRA for 2020, and those over 50 can contribute $ 7,000. Individuals with individual coverage from a high deductible health plan could save up to $ 3,550 in 2020. Families could save up to $ 7,100 and people 55 and older can contribute an additional $ 1,000 per year.

Even if the deadline for these is delayed, it is worthwhile for contributors to research how to make such contributions now.

“They should consider it sooner rather than later because the IRA contribution deadline does not include extensions, so it will stay on April 15 or May 17, but not beyond,” said Luis Rosa, a CFP and enrolled agent. and founder of Build a Better Financial Future in Henderson, Nevada.

Scheduling a Stimulus Check

For many Americans, the tax refund is one of the biggest windfalls of the year. Those hoping to get theirs as soon as possible should file sooner rather than later so the IRS can process their return and send the money.

Additionally, families and individuals affected by the coronavirus pandemic may not want to wait to apply. Filing your 2020 taxes is the only way to claim the stimulus payments you could receive based on last year’s income.

Just because the deadline is extended doesn’t mean waiting until May 15 to get it all together

Anjali Jariwala

CFP, CPA, founder, Fit Advisors

“If your income decreased in 2020 from 2019 levels or if you’ve had a child, you probably want to file your taxes as soon as possible,” said Mandi Woodruff, Ally’s lead consumer advocate. “The stimulus payments are generally 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, such as the recent expansion of the child tax credit.”

And, although the IRS delayed the deadline for filing federal returns, many state deadlines for local taxes have not been extended. It may make sense for some Americans to file both returns at the same time before the IRS due date.

Extra time could mean extra help

Sure, the IRS can still extend other deadlines to coincide with the new filing date, as it did last year. And there are some cases where waiting to apply can help some qualify for the latest round of stimulus checks.

If you received stimulus checks in 2019 but made more money in 2020, making you ineligible, you will want to wait to receive your payment before applying. The IRS will use the 2019 income they have and will not claim the payment when they see that you are not eligible 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 your state will also follow IRS guidelines not to tax the first $ 10,200 of unemployment benefits,” he said, adding that this would also reduce any taxes owed or increase a refund.

If you want to take the extra time to your advantage, you can take your return to a taxpayer and make sure you don’t leave money on the table, according to Adam Markowitz, an enrolled agent for Howard L Markowitz PA CPA in Leesburg, Florida.

The IRS had received more than 66 million returns as of March 12, according to the agency. Of the more than 63 million that were submitted electronically, more than 34 million, or about 54%, prepared themselves.

“That’s a scary number for me,” Markowitz said. “There are literally hundreds of millions, if not billions of dollars, of money that people just don’t have a clue they can go for.”

REGISTER: Money 101 is an 8-week financial freedom learning course delivered weekly to your inbox.

CHECK OUT: How to make money from creative activities, from people who earn thousands on sites like Etsy and Twitch through Grow with Acorns + CNBC.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

.

Source link