Extra Time Provided for Filing 2020 Taxes may offer Financial Planning Opportunity

The federal income tax filing due date for individuals for the 2020 taxes has been extended from April 15, 2021, to May 17, 2021.  Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed.  Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties. Penalties, interest, and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.   

•  Filing a form to qualify for this automatic federal tax filing and payment relief is not necessary. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional (But they still to pay by May 17th, 2021). Filing Form 4868 gives taxpayers until October 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due.
• Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.
• Time to make contributions to IRAs and health savings accounts has been extended to May 17, 2021. In extending the deadline to file Form 1040 series returns to May 17, 2021, the IRS is automatically postponing to the same date the time for individuals to make 2020 contributions to their individual retirement arrangements (IRAs and Roth IRAs), health savings accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Coverdell education savings accounts (Coverdell ESAs).  This postponement also automatically postpones to May 17, 2021, the time for reporting and payment of the 10% additional tax on amounts includible in gross income from 2020 distributions from IRAs or workplace-based retirement plans. 
• For tax year 2017 Federal income tax returns, the normal April 15 deadline to claim a refund has also been extended to May 17, 2021. The law provides a three-year window of opportunity to claim a refund.  If taxpayers do not file a return within three years, the money becomes property of the U.S. Treasury. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the May 17, 2021 date.
• Foreign trusts and estates with federal income tax filing or payment obligations, who file Form 1040-NR, now have until May 17, 2021.
• Estimated tax payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. Estimated tax payments are made quarterly to the IRS by individuals whose income is not subject to income tax withholding, including self-employment income, interest, dividends, alimony, or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

Many Taxpayers realize that this is the right time to think about financial planning.

Given the fact that their financial records are updated and handy, Taxpayers ought to start financial planning.   The information contained in a Taxpayer’s Tax Return can be instrumental in developing a plan to achieve financial goals.    

Who is assisting you with your Tax Return?

Have you started your Financial Planning? ©