Last week we learned that the due date for certain federal income tax payments was postponed from April 15, 2020 until July 15, 2020 because of anticipated coronavirus-related disruptions. Since then the Internal Revenue Service (IRS) has already announced a few more changes and clarifications worth reviewing. First, the federal income tax filing due date has now been extended as well to July 15, 2020.
Taxpayers do not need to submit any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. An additional filing extension as always can be requested with Form 4868 (Form 7004 for businesses), but note that as of this writing if you seek the typical six-month extension by July 15, 2020 you will still only have until the usual October 15th deadline, not January 2021. As for the majority of taxpayers who will not owe the government money but instead expect to receive a refund, the IRS reiterated that these individuals should still file as soon as possible because the new deadline extensions will not have any effect on when refunds are dispersed.
Moreover, most refunds do not require manual processing, so recent IRS staffing shortfalls caused by the coronavirus should not matter, and the IRS still sees the average tax refund being issued within 21 days. Accurate and timely filing may also help speed up the distribution of the COVID-19 relief payments to lower- and middle-income Americans included as a part of the massive rescue package that Congress recently passed. Another clarification the IRS provided has to do with contributing money to an IRA for the 2019 tax year. Specifically, the annual deadline for making IRA contributions for a given tax year generally falls around April 15 of the following year.
However, because the due date for filing federal income tax returns has been postponed to July 15, the deadline for making contributions to your IRA for 2019 will also be extended to July 15. This means Americans now have around another 90 days to make contributions, and in turn potentially lower their tax bill. A similar extension will apply to health savings account (HSA) contributions, which could be especially useful given the ongoing COVID-19 outbreak and likelihood of insurance premium increases next year. As a reminder, contributed HSA funds roll over and accumulate year-to-year if they are not spent, therefore making HSAs another powerful tool for growing your overall savings.
Sources: U.S. IRS, NAPA
Post author: Charles Couch