If you’re a procrastinator who thrives under pressure and deadlines, Monday is your special day — to finally get around to this year’s tax return.
Monday, May 17, is Tax Day, the deadline to file your 2020 income taxes. Earlier this year, the Internal Revenue Service pushed the deadline to May 17 from the traditional April 15 date.
People living in Texas, Oklahoma, Louisiana have a June 15 federal filing deadline following February winter storms. People living in portions of Tennessee have until Aug, 2 following recent storms and tornadoes in the state.
First, the bad news: It’s an especially complex tax year with a lot of twists and turns in the tax code. That’s because these returns take into account pandemic-related costs and other government responses to 2020’s economic fallout from the pandemic. So rushing runs the risk of overlooking key write-offs or eligible claims.
Next, the good news: You can still do this without leaving money on the table. You might not be able to start your taxes and then submit them all in a day’s work on Monday. But at least you can buy time in order to get everything that’s coming to you.
As of May 7, the IRS received 126.7 million individual tax returns. That’s 1.1% fewer returns than the same point last year, when the filing deadline was pushed all the way to July 15, 2020.
The average refund, as of May 7, is $2,863.
Step 1: File an extension
The first step is filing for an extension. This way, you now have an Oct. 15 deadline to file your tax return. Don’t blow off this requirement if you owe taxes, because experts say the penalties for failing to file a return on time may actually be stiffer than penalties attached with failure to pay in full on time.
“Even if you can’t pay, it is very much in your best interst to file an extension,” said Andy Phillips, a director at H&R Block’s Tax Institute.
The IRS Free File Program is designated for annual incomes up to $72,000, but when it comes to electronically submitting an extension request, there’s no income rules, the agency noted.
Another way to do it is by simply mailing in a Form 4868, which is an application for automatic extension. The mail needs to be postmarked by Monday, May 17 for the application to be considered on time, according to Henry Grzes, lead manager for tax practice and ethics with the American Institute of CPAs.
Be sure to send in the application via certified mail so you have proof of mailing on May 17, Grzes said.
States may or may not require their own extension paperwork because some states allow the IRS form to double up as the request to the state, he said.
Step 2: Pay any tax bill owed (or as much as possible)
Here’s the key point on extensions: They are giving you more time to file your return — but it’s not buying you more time to pay any federal taxes owed. May 17 is still the payment deadline.
A person’s tax liability situation can get complicated and vary from year to year, Grzes said. But one rough estimate — if a person’s work and life situation hasn’t changed much from tax year 2019 to tax year 2020 — is checking how much you paid the previous tax year and then checking that number against how much you paid so far for the 2020 season.
Two considerations: The IRS can work out installment plans to pay down a bill. The state where a taxpayer lives may also have a tax bill waiting.
Some states don’t assess income tax. They are Texas, Florida, Alaska, Nevada, South Dakota, Washington and Wyoming also have no income tax. New Hampshire and Tennessee only tax investment income.
The payment deadline was simultaneously extended with the filing deadline for people living in Texas, Oklahoma, Louisiana and portions of Tennessee.
Step 3: Be ready for a lot of tax-code twists
The 2020 return addresses scenarios like whether a person missed stimulus-check money and how best to maximize tax credits for low- and moderate-income families. There’s also a prominent question on cryptocurrency and rules on write-offs for protective personal equipment purchased to slow the spread of COVID-19.
MarketWatch has a checklist on some of the tax issues to be ready for.
But taking steps on Monday, like filing the extension and trying to pay at least some of the bill are the important first steps at this point. “Then you’ve got time to get help,” Phillips said.