Taxes are a little more complex than usual this year.
While April 15th normally marks the due date for personal tax returns every year, 2020 was far from normal and federal income tax returns for individuals are now due on May 17, 2021 and many states are delaying as well. The IRS announced in March that its tax deadline would be pushed back from the usual date. In a statement they said, “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds.”
However, no extension has been provided on quarterly estimated payments as yet. Although the passage of new tax laws such as the CARES Act, the Consolidated Appropriations Act and the American Rescue Plan Act has made it difficult in some instances to estimate quarterly taxes, especially with so many Americans losing income last year, and so discussions on the matter are ongoing.
Why the delay, you may ask? First thing to consider is that last year, a shutdown because of the pandemic left the IRS with a backlog of unprocessed paper tax returns. This year, even with the late start to the tax season, the agency is still struggling to deal with the 2019 paper returns, along with a rush of 2020 returns.
Next thing to think about is that it’s the responsibility of the IRS to issue stimulus checks as part of the COVID relief package. Congress decided not to tax a portion of unemployment checks after tax season began, forcing the IRS to adjust. All of this while the IRS is playing catchup on 2019. So an increase in responsibility on top an already stretched department has resulted in needing more time to effectively service the public.
So with a little extra breathing room this year, by now you should have all your 1099s, W2s and tax documents collected and ready to go.
With things changing all the time and Congress pushing the IRS to reconcile deadlines, it’s a good idea to double-check due dates.
The agency continues to grapple with pandemic challenges and filers are seeing “more refund delays” than usual this year, according to an online update on March 25 from the Taxpayer Advocate Service.
The number of returns processed by the I.R.S. as of April 2 was down about 10 percent from a year earlier, according to statistics provided by the agency. But the start of this year’s tax season was delayed to allow the agency to update and test its systems to reflect tax changes approved by Congress late last year. The number of returns processed on comparable days of the season is up about 3 percent, the agency reported.
A word to the wise: keep track of your state’s deadline, and consult a tax professional for the latest updates.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.
Member FINRA & SIPC.