Taxpayers got another reprieve this year when the IRS announced that for the second year in a row, the filing deadline for federal tax returns would be delayed because of the unusual burdens caused by the COVID-19 pandemic. The new deadline for 2020 tax returns is May 17, rather than the usual April 15, giving taxpayers, tax preparers, and the IRS extra time to digest last-minute tax changes authorized in the American Rescue Plan Act.
So what does this extension mean for you? Here are answers to some popular questions so you can prepare this tax season.
What was delayed until May 17?
The deadline for filing federal tax returns and making payments to the IRS.
Who does the new deadline affect?
The new deadline applies to individual taxpayers but not corporations.
Are estimated tax payments, usually due on April 15, delayed as well?
No. Estimated payments for the first quarter of tax year 2021 are still due on April 15. These payments reflect current income, and you are supposed to pay tax on your income as you earn it, either through withholding or estimated payments. If you are self-employed or receive interest, dividend, rental or other income, you should be making estimated tax payments quarterly.
What about state tax returns?
The postponement announced by the IRS applies only to federal tax returns, but most states are following suit. As of April 13, 36 states and the District of Columbia had postponed the due date for their state tax returns to May 17, and three extended the deadline beyond that.
The Association of International Certified Professional Accountants (AICPA) has a list of every state with a May 17 deadline, as well as info for those other states that have special circumstances or that did not extend the deadline at all.
Can I wait until May 17 if I owe money to the IRS?
Yes. You can pay any federal taxes owed for tax year 2020 by May 17 without penalties or interest, regardless of the amount you owe. This rule applies to all individual taxpayers. Penalties and interest on unpaid balances will start to accrue as of May 17.
What if I’m self-employed?
The tax deadline extension applies to self-employed individuals as well.
Do I have to do anything to get the extension?
No. The postponement announced by the IRS is automatic for individual taxpayers. You don’t need to file for an extension unless you won’t be able to get your taxes done by May 17.
What if I still need more time?
You can still request a traditional extension, which gives you until Oct. 15, to file your federal tax return. However, penalties and interest will start to accumulate after May 17, so if you need to make a payment, it’s best to do so by the May 17 deadline. To request an extension, you must file Form 4868, available at the IRS website or through your tax prep firm or tax software.
Is the deadline for other 2020 contributions now May 17, too?
Yes. The new IRS deadline applies to 2020 contributions to individual retirement accounts (IRAs), both traditional and Roth, as well as to health savings accounts (HSAs), Archer Medical Savings Accounts, and Coverdell education savings accounts.
The IRS changed the tax rules on unemployment benefits for 2020. What should I do if I’ve already filed my return?
Nothing. If you are owed a refund, you will get it automatically from the IRS. The American Rescue Plan Act, approved on March 11, included a provision that exempts from federal tax the first $10,200 of unemployment benefits received in 2020, if you made less than $150,000. The IRS announced on March 31 that it would recalculate taxes on unemployment benefits for those taxpayers who filed their returns before March 11 and send them automatic refunds, if appropriate.