Tax Year 2020: Filing Deadline Changes and News You Need to Know
The IRS announced that “Tax Day for individuals extended to May 17”. The U.S. Treasury and the IRS extend the filing and payment deadline for tax year 2020.
Here is an excerpt from the announcement linked above from the IRS that we think will be of particular interest to taxpayers in Washington State:
“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”
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. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. 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.
The announcement does point out that this decision does not postpone estimated tax payments for the tax year 2021:
This relief does not apply to estimated tax payments that are due on April 15, 2021. These 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. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t 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.
The IRS said the extended deadline is only for federal returns and that taxpayers may still have to file their state taxes by April 15. While several states have already extended their deadline to match the federal deadline, the IRS advises taxpayers to check with their state to ensure they don’t pay their taxes a month late. Oregon extended the filing deadline for state taxes to May 17th. At this time, Idaho hasn’t extended the deadlines for the any taxes due in 2021.
Related to the IRS filing delay, the IRS has a backlog on processing 2019 returns as tax changes related to the pandemic have made filing more complicated. The IRS is behind in processing over seven million tax returns and is now sending out another round of stimulus checks to Americans. The IRS said it has already sent out about 90 million payments totaling $242 billion. An example of the complications involved in filing taxes for the tax year 2020, the stimulus bill passed into law earlier in March 2021 exempted the first $10,200 in unemployment aid from federal income taxes. When this newsletter was prepared, the IRS has yet to issue guidance to taxpayers who already filed their returns on how to handle this. The taxpayer’s individual tax return for the tax year 2020, Form 1040, is also the mechanism for people to claim any missing $1,200 or $600 stimulus payments from last year. The $1,400 stimulus payments are not taxable, nor were the stimulus payments that came before. They will not adversely affect tax returns or refunds from last year or this year.
So, What Does All This Mean to Me?
With a new administration and a new Congress taking office next year, we should expect more changes to both policies and the IRS tax code. We should expect that the complexities of the law to continue to be difficult for individuals to understand and to act on without making potentially serious mistakes. Moreover, for individuals with IRS tax problems, having the guidance and representation of a widely acknowledged expert in IRS law and tax policies with years of experience and relationships with key contacts to help streamline delays is more important than ever, especially given the very difficult times that we are all facing today.
If All This Seems Confusing or Too Complicated, Please Call Us for Help
IRS tax problems or long neglected debts can be complex and overwhelming. The team at the Law Offices of John A. Sterbick may be able to help you understand your situation; We can certainly help you by discussing certain trade-offs and options concerning your situation with your debts, the IRS, and bankruptcy.
The Sterbick team does our best to give each client the best, unbiased advice that we can provide in every case. We do not automatically recommend bankruptcy; we tailor our advice to each person’s circumstances. We would never advise a client to take actions that would worsen their circumstances and increase their debts. Our goal is always to design a plan and carefully explain the plan to our client in order to help our clients work towards rebuilding a sound financial future.
Financial stress is not a healthy state, and it does not cost you anything to check out your options. Please contact my office to make an appointment for a free, confidential, personal consultation to review your circumstances together.