Due to the economic uncertainty related to Coronavirus (COVID-19), the IRS granted an automatic 2020 tax extension to July 15 for income tax returns and payments originally due on April 15. Before paying your taxes, consider whether or not you should use that time to save more.
In March, the IRS announced the 2020 tax deadline extension that moves the due date for calendar year taxpayers to file and pay taxes to July 15. The delay happens automatically and doesn't require you to do anything special to receive the extra time.
In light of these unusual circumstances and the automatic extension, you might wonder whether it makes sense to file as soon as you're able or wait until the new deadline. After all, just because you have the extra time, does that mean you should use it?
Are there financial benefits for waiting to file?
Regardless of the circumstances, you should always try to complete and file your return as early as possible. Having the additional time is no different. Filing before the July 15 tax deadline has a number of benefits:
- Faster tax refunds.
- Extra time to plan for the taxes you owe.
- Guarding against identity theft.
This year also came with another reason taxpayers needed to file as soon as possible. The CARES Act provides relief in the form of stimulus payments for millions of Americans. The amount of money you receive and how you receive it is based on information from your 2019 tax return, or if you haven't filed yet, your 2018 tax return if you already filed for that year.
- Most single people with adjusted gross income (AGI) up to $75,000 qualified for $1,200.
- Most married couples who file jointly with AGI up to $150,000 qualified for $2,400.
- Parents could receive $500 for each dependent child 16 or younger.
- Those earning $99,000 and above as single and $198,000 and above as married filing jointly were not slated to receive a stimulus payment.
In the event that your 2020 income provides for a higher stimulus payment than you received based on your 2018 or 2019 AGI, you should receive the difference when you file your 2020 tax return.
If you owe taxes, do you have to pay when you file?
If you file your completed 2019 tax return prior to the July 15, 2020 deadline and owe money, you don't need to pay until July 15. You can file your return now to determine your tax liability and then use the remaining time to save money or figure out how you will pay come July 15.
Another benefit of the 2020 tax extension is that it applies to most other tax deadlines as well, including more time to make 2019 contributions to individual retirement accounts and health savings accounts and possibly receive tax savings on your 2019 taxes.
- If you still have concerns about your ability to pay your tax bill, even by July 15, you should contact the IRS to discuss alternative payment arrangements.
- The IRS offers numerous plans that help to space out payments into installments over longer periods of time.
- If it comes to it, you can also look into other options like an offer in compromise, which is a way to tell the IRS what you can pay and avoid the full tax bill if it agrees.
Should you take advantage of the tax deadline extension?
The automatic 2020 tax extension means that if you owe money for 2019 taxes, you can file your return as soon as you're ready and then wait until July 15 to pay your taxes.
- If you feel worried about job security and think you won't have the money to pay by then, you can usually request an installment agreement payment plan.
- If you feel secure financially and think you'll have the funds to pay your tax bill now or by July 15, it's up to you when to pay—file and pay now, or file now and pay by July 15.
The 2020 tax extension takes a lot of pressure off of those expecting to owe money since you can file now and don’t have to pay until July 15. If you're expecting a refund, there's also likely little benefit to waiting to file, especially since the majority of taxpayers receive a tax refund.