In response to the coronavirus, the Internal Revenue Service (IRS) just gave Americans an extra three months to file their tax returns.
The deadline to file federal 2019 individual tax returns was pushed back from April 15 to July 15, 2020.
After announcing the regulatory move on Friday, Treasury Secretary Steven Mnuchin tweeted:
This is a bit of relief for those whose primary concerns are staying healthy or recovering from COVID-19.
Just what does this delay mean for when you should file, when you’ll get your tax return, or how it impacts your retirement savings decisions?
Here are 5 things you should know:
- Tax refunds won’t be delayed, for now. If you are owed a refund, the extension will not delay your refund. In fact, as of March 13, over 59 million tax refunds (78 percent of total individual income tax returns received) had been issued. We don’t know if efficiency in processing returns will continue.
- Some states are extending their deadline too. California, New York, Maryland and a few other states have extended their tax filing deadlines, but not all of them for July 15. You can check if your state delayed its filing deadline here.
- Tax payment deadlines are extended too. If you owe taxes, you can defer up to $1 million in tax payments until July 15, interest and penalty-free. That’s likely to be a little relief for many who will get a little extra time.
- You may have more time to contribute to your retirement plans. The 90-day delay may extend your time to contribute to your Individual Retirement Account, Roth IRA or Health Savings Account for 2019. According to IRS Code, contributions are considered to be made during a given taxable year so long as they are made by the filing deadline. The IRS has not yet affirmed if the contribution deadline will also be extended.
- You may not an extra, extra tax filing delay. If you usually file to get an automatic 6-month extension to October 15, don’t count on getting an even longer delay this year. The IRS has yet to say whether they will push back this extension deadline by 3 months.
The big takeaway is that Americans have more time to file their taxes, but it doesn’t mean that they should procrastinate.
For those who paid too much in taxes and are owed a refund from Uncle Sam, the refund may come in handy to defray coronavirus-related expenses. It will also be a help to those not earning pay during this time.
If COVID-19 restrictions on businesses and government operations ramp up, there’s no guarantee that the IRS will be able to process tax returns and pay out refunds as they have been.
Let’s not forget that a tax return may feel like a free check, but it’s your money that Uncle Sam borrowed interest-free all year long. Why let him hold as much of your money and for longer than is necessary?