Next Monday, May 17, is the official deadline for individuals to file their 2020 federal tax return, and in most instances their state tax return, too.
It’s a month later than usual, thanks to the pandemic. But the filing deadline’s not the only thing that’s changed. Many of the upheavals over the past year have caused other changes to your taxes. Due to the Covid crisis, there are plenty of new and revised provisions and important dates you will need to know about before filing your return this year.
Here are some of the most important ones.
Unless you choose to file for an extension (see question below) you must file and pay any remaining federal income taxes you owe for 2020 by May 17.
That way, you will avoid being hit with any potential late filing or late payment penalties.
There are two exceptions to the new extended federal deadline.
The first applies to anyone who pays estimated taxes, including many small businesses. Your usual April 15 payment was still due on April 15.
The second applies to anyone living in Texas, Oklahoma and Louisiana, who were hit hard by the February storms. The IRS extended the federal tax deadline for residents in those states to June 15.
Do I also get more time to file my state taxes then?
In most instances.
Even though the IRS extended the federal filing deadline, it was up to individual states to set their own tax deadlines.
And most have extended their filing deadlines to May 17 to align with the federal schedule. They include Alabama, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, West Virginia and Wisconsin.
Some states’ filing dates differ. They are Hawaii, April 20; Iowa, June 1; Maryland, July 15; and Oklahoma June 15, although technically that only applies to tax payments, whereas returns still had to be filed by April 15.
In Louisiana, the deadline is May 17, although residents living in federally declared disaster areas due to the February winter storm have until June 15.
Do I get more time to make contributions to my IRA and Health Savings Account?
Yes. You now have until May 17 to make 2020 contributions to your IRA, Roth IRA, Health Savings Account, Archer Medical Savings Account (Archer MSA), and Coverdell Education Savings Account (Coverdell ESA).
Can I file for an extension to file my 2020 return?
But note that an extension to file is not an extension to pay what you owe. You still must pay any remaining federal taxes owed on your 2020 income by May 17, if you want to avoid a potential late payment penalty.
And if you’re owed a refund, taking longer to file your taxes means you will wait longer to get your refund.
When can I expect my refund?
Typically refunds are issued within 21 calendar days of the IRS receiving your return. The fastest way for you to receive yours is to file electronically and choose direct deposit, the IRS notes.
But this year, there is an unusually large backlog of returns to be processed both from 2019 and 2020. As of April 22, there were more than 29 million returns being held for manual processing, according to National Taxpayer Advocate Erin Collins. So any refunds from that batch are likely to be delayed.
The IRS also has said it is taking longer to process mailed documents, such as paper tax returns, and correspondence related to one’s tax return — for instance, if the IRS requested more information or found an error in a filer’s calculations.
IRS Commissioner Rettig told lawmakers on April 13 that any returns going through the agency’s error resolution service are taking 10 to 14 days to process, up from the typical three to five days in a normal filing season.
Are my stimulus payments taxable?
No. The money is tax-free.
That credit will reduce your income tax liability dollar-for-dollar. And to the extent the credit exceeds your tax liability, you’ll get the remainder as a refund.
Are my unemployment benefits taxable?
Yes, but for households with modified adjusted gross income below $150,000 last year, the first $10,200 in unemployment benefits for each taxpayer in a household will be exempt from federal income tax, thanks to a provision in the latest Covid relief package signed into law by President Joe Biden.
Also, when figuring out whether you are eligible for the $10,200 exclusion, you do not have to count any income from your unemployment benefits as part of your calculations of modified AGI, according to Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting.
Of course, if you live in a state with an income tax that also taxed unemployment compensation, you also should check your state revenue department’s web site to see if your state has decided to follow the IRS and exclude the first $10,200 from state income tax as well.
If you didn’t opt to have any income tax withheld from your unemployment payments during the year, the full tax bite will be assessed when you file your return.
But if your 2020 income was very low because you didn’t work for a big chunk of last year, it’s unlikely you will have to cut a check to the tax man. Instead, you will see your federal and state refunds reduced by whatever income taxes you owe on your jobless benefits.
What other new pandemic-related tax changes should I know about?
Are there any new tax breaks for students?
Also, even if you used any part of those grants for qualified tuition and related expenses in 2020, you still may be eligible to claim a tuition and fees deduction, the American Opportunity Credit or the Lifetime Learning Credit on your return.