Tax Season Tips & the Deadline Delay | Lord Abbett
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Practice Management

Income tax filing for individuals is extended a month for federal returns but not for all states; estimated taxes still due April 15.

Read time: 2 minutes

In case you haven’t heard, the Internal Revenue Service (IRS) has extended the 2020 tax filing due date for individual returns from April 15 to May 17. But before you relax and celebrate the reprieve, it’s a bit more complicated than that. Here are a few things to keep in mind.

Individual income tax filers get an extension

You have until May 17 to file your federal tax return for 2020 and to pay any taxes due without owing late-payment penalties or interest.

You also have until May 17 to contribute to an individual retirement account (IRA) or a Roth IRA as well as health savings accounts, Archer Medical Savings Accounts, and Coverdell education savings accounts.

A total of 35 states have also extended their income tax return deadline for 2020 to May 17. In addition, the IRS is giving victims of the winter storms in Texas, Oklahoma, and Louisiana until June 15 to file their taxes and make payments. Certain states have done the same for winter storm victims.

The key takeaway here: Check with your state tax department to make sure you don’t miss your state tax-filing deadline.

Estimated quarterly taxes still due on April 15

If you pay quarterly estimated taxes, they are still due on April 15, 2021. No extensions there. This applies to people who don’t have income taxes regularly withheld from wages via payroll deduction. This includes self-employed individuals, small business owners, and retirees who have investment income.

Business taxes not extended

If you own a small business, be sure to file any business taxes by their original due date as these tax return deadlines have not been extended.

The reasons for the extension: COVID-19 & the American Rescue Plan Act

The $1.9 trillion economic stimulus bill officially known as The American Rescue Plan Act of 2021 (ARPA) was passed by the U.S. Congress on March 10 and signed into law by President Biden the following day. Because that gave the IRS, tax preparers, and tax software providers no time to adjust to tax changes, the IRS had little choice but to extend the deadline for filing 2020 tax returns.

The key tax change in ARPA affecting many people’s returns is that the first $10,200 of unemployment benefits received in 2020 is tax-free for households with incomes below $150,000.

Individuals who already filed their returns are advised not to file an amended return for now because the IRS could make the necessary changes in processing tax returns.

Five To Do’s

Here are five actions you may want to take in the next few weeks:

  1. Prepare your 2020 tax return for April 15 if you have first-quarter estimated tax payments due.
  2. Make that Q1 payment by April 15.
  3. Determine when your state income tax return is due and file it on time with any taxes due.
  4. File your tax return as soon as possible if you expect a refund.
  5. File and pay any taxes due by May 17 if you owe taxes.      

And finally, let’s all hope and pray that we never see another year like 2020 – or another messy tax season like this one!

 

The information provided herein is not directed at any investor or category of investors and is provided solely as general information about our products and services and to otherwise provide general investment education. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as Lord, Abbett & Co LLC (and its affiliates, “Lord Abbett”) is not undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity with respect to the materials presented herein.  If you are an individual retirement investor, contact your financial advisor or other non-Lord Abbett fiduciary about whether any given investment idea, strategy, product, or service described herein may be appropriate for your circumstances.

The opinions in the preceding commentary are as of the date of publication and are subject to change. Additionally, the opinions may not represent the opinions of the firm as a whole. The document is not intended for use as forecast, research or investment advice concerning any particular investment or the markets in general, and it is not intended to be legal advice or tax advice. This document is prepared based on information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy and completeness of the information.

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