The IRS has extended the 2021 tax filing deadline to May 17 for most taxpayers. But there's an additional tax extension until June 15 for those impacted by winter storms in some states.
For many filers, tax time can be a chore—poring through confusing forms and sometimes getting stuck in paperwork limbo. Missing data, a complex situation, or lingering hopes that you can sneak in one more deduction might have you wondering whether you can get everything done before the deadline. Plus, what if you’ve been struggling with the recent global events that have caused major disruptions?
As the global pandemic continues to disrupt lives, the IRS recently pushed the filing deadline back a month—to May 17—for the 2020 tax year. The main exception, though, is if you were affected by winter storms in Texas, Oklahoma, or Louisiana. In that case, the IRS has extended the filing deadline to June 15, 2021. (Check with the IRS for specifics and consult a tax advisor for eligibility.)
If you still require more time, you might consider filing an extension. But remember, you’ll need to file something—a return or an extension—by the May 17 deadline. Here’s what you need to know.
First of all, if you’re looking at your paperwork and thinking you could use just one more deduction, you might be in luck. If you have an Individual Retirement Account (IRA) or health savings account (HSA) but didn’t max them out last year, you can still get a tax deduction if you qualify—as long as you get the money into your account by May 17.
In late March 2021, the IRS clarified its position on IRAs and HSAs. The filing extension automatically postpones the 2020 contribution deadline until the May 17 filing deadline extension. So, if you’ve not contributed the 2020 maximum in your IRA or HSA, the IRS has given you another month.
For the 2020 tax year, the federal tax filing has been pushed back to May 17, 2021, but residents of Texas, Oklahoma, and Louisiana affected by the winter storm have an extended deadline of June 15, 2021. (Consult a tax advisor for eligibility).
“Review your contributions to accounts like IRAs and HSAs,” said Eric Nisall, a tax professional specializing in small and online businesses. “You can still make previous-year contributions until the filing deadline.”
In fact, you can even open an account. If you planned to open an IRA last year but didn’t make it happen, you can still open one, fund it, and take the deduction. The same goes for an HSA. As long as you qualify for an HSA, you can open one and make a previous-year contribution.
Nisall warned that you need to double-check everything before making your contribution, though. There should be a choice for “previous-year contribution.” Be sure that box is checked before you submit. Otherwise, you could end up contributing to the wrong year.
Before moving forward, make sure you’re eligible for these accounts. There are limits to IRA deductions, including income limits, so your contributions might not make a difference on your return. And although there are no income limits associated with claiming a deduction for an HSA, you do need to have a high-deductible health plan to open one.
The key to filing taxes is being prepared. TD Ameritrade provides information and resources to help you navigate tax season.
With a tax extension, you have until October to turn in your paperwork, giving you some breathing room if the paperwork really isn’t ready.
“If there’s any doubt that you’re going to make it by the deadline, just file for an extension,” Nisall recommended. “Filing for an extension doesn’t mean you have to wait. It just gives you the option.”
He pointed out that it’s better to have an extension and take the time to complete your return the right way, rather than rush through things and wind up having to file an amended return later. An extension can be filed online with a single form. You get automatic approval by filing Form 4868.
“Once that’s in place, you have the ability to file whenever it works for you, up until October,” Nisall explained. “If you end up filing before tax day anyway, fine. If you need until September to get your documentation together, you have that time.”
Realize, though, that even if you file an extension, you’re still on the hook for payment. If you know you’re going to owe, do your best to estimate your tax bill. The IRS still expects to be paid, even if you haven’t finished your tax return. You’ll be assessed 1% of the amount owed for each month you don’t pay.
Failure to file your tax return on time comes with a bigger penalty than you might expect: 5% of the balance you owe. However, if you file for an extension, your penalty is only 0.5%. It’s still a penalty, but it’s much smaller (and if you end up filing on time, you avoid that penalty).
There might be several reasons to file for an extension, including:
Even if you’re not quite ready for tax time, you still have choices. You can file for an extension if you need a little extra room to get it right, and you may still be able to claim deductions for previous-year contributions. Take a few minutes to review the situation and decide if an extension is the right move for you.
Maximum contribution limits cannot be exceeded. Contribution limits provided are based on federal law as stated in the Internal Revenue Code. Applicable state law may be different.
TD Ameritrade does not provide legal or tax advice. Please consult your legal or tax advisor before contributing to your IRA or making tax decisions.
Miranda Marquit is not a representative of TD Ameritrade, Inc. The material, views, and opinions expressed in this article are solely those of the author and may not be reflective of those held by TD Ameritrade, Inc.
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