Americans have about a month left to file their 2020 tax returns. What to do now

Personal Finance

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If you haven’t filed your 2020 tax returns yet, you’re in luck — you have more than a month to get your paperwork to the IRS.

The IRS moved the filing deadline this year for individual returns to May 17 from April 15.

In addition, May 17 is also the last day to contribute to individual retirement accounts, Roth IRAs and health savings accounts, as well as Archer medical savings accounts and Coverdell education savings accounts for 2020.  

The tax season has been a complicated one for many Americans. The American Rescue Plan made changes to the tax code after the IRS started accepting returns, and at the same time tasked the agency with sending out another round of $1,400 checks.

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Prevent tax return anxiety by following these steps

The changes meant that many had to hold off on filing their returns, delaying refunds or even previous stimulus payments they were owed and didn’t receive.

The IRS and state departments of revenue are still sending out guidance for some taxpayers as the season goes on, adding to tension as the filing deadline nears. Still, many taxpayers shouldn’t worry too much, according to Adam Markowitz, an enrolled agent with Howard L Markowitz PA CPA in Leesburg, Florida.

“Everything’s going to get done, and if it doesn’t get done, it’s not the end of the world,” he said.

Here’s what to know before you file.

Get your paperwork together

Before filing, a good rule of thumb is to look over last year’s return to make sure you’re not missing any documents that should be included.

“This way you can file on time knowing that you are not leaving [out] any other pieces, and that the state, and federal government, both have all the information that you need to file your tax return,” said Sheneya Wilson, CPA and founder of Fola Financial in New York.

This year, there are a few extra things some taxpayers need.

If you got unemployment insurance benefits in 2020, the American Rescue Plan made changes to what is considered taxable income. Now, the first $10,200 of those benefits — or $20,400 for a couple filing jointly, when both partners got unemployment — is not taxable for those who had an adjusted gross income of less than $150,000 in 2020.

Those who had unemployment income should make sure they have a 1099-G from their state before they file federal returns, and that they’ve correctly deducted the income that isn’t taxable.

Most who filed before the updated rule don’t need to take any further action to get back the taxes they paid on unemployment income that should have been exempt — the IRS said it will automatically process refunds for those individuals and that those should begin to be sent in May.

In some cases, the IRS said taxpayers may have to file an amended return to make sure they get the tax break.

In addition, if you should have received one of the previous stimulus payments but didn’t get it, you need to file for a recovery rebate credit to claim the money on this year’s return.

Be aware of deadlines that differ from May 17

To be sure, some taxpayers do need to adhere to the original April 15 deadline. The first estimated quarterly payment — made by those who have income from self-employment, interest, dividends, rent and alimony — is still due on April 15.

In addition, some states have state tax-filing deadlines that differ from the due date for federal returns. Taxpayers in Hawaii must file their state returns by April 20, while those in Oklahoma and Maryland have until June 15 and July 15 respectively.

And, those affected by winter storms in Texas, Oklahoma and Louisiana have until June 15 to file their taxes, following disaster declarations issued by the Federal Emergency Management Agency.

For most states, however, the state deadline is also May 17 to match the federal government and make it easier for taxpayers to complete everything at once.

Filing late can lead to penalties and interest for those who owe taxes which start to accrue after the deadline, said Wilson. But, if you’re owed a refund, like most Americans, you won’t see any penalty deducted from the amount you receive, and you have up to three years to claim the money.

File when you can  

Filing as soon as you can is the quickest way to get back any refund you’re owed, and can protect against fraud, according to Wilson.

“To make sure that your tax refund is going to go to you, you want to file as early as possible, because the IRS accepts returns on a first come, first served basis, according to your taxpayer ID number, which is a Social Security number,” she said.

The IRS had received more than 93 million 2020 tax returns and processed nearly 84 million through April 2. So far, the agency has sent out more than 62 million refunds, with an average refund of $2,893.

Taxpayers shouldn’t necessarily rush to file, said Markowitz of Howard L Markowitz PA CPA.

It is far more valuable to make sure your tax return is done right than done right now
Adam Markowitz
enrolled agent, Howard L Markowitz PA CPA

For example, those who haven’t received a stimulus payment yet and want the IRS to use their 2019 information should hold off on sending the agency their 2020 return, Markowitz said. Once they’ve gotten the payment, then they can go ahead and file.

Others may also be waiting for guidance on unemployment income or other provisions from their state, meaning they should wait to file.

And, if you can’t submit your return to the IRS by the May 17 deadline, it’s easy to file for an extension, giving you until Oct. 15 to file your 2020 taxes.

Making sure that they’re done correctly can help you avoid the costly process of amending a return in the future, according to Markowitz.

“It is far more valuable to make sure your tax return is done right than done right now,” said Markowitz.

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