Due to the economic uncertainty related to Coronavirus (COVID-19), the IRS granted an automatic 2021 tax extension to May 17 for most individual 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.
For information on the third coronavirus relief package, please visit our “American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” blog post.
The IRS 2021 tax filing deadline extension moves the tax filing and paying due date for most individual taxpayers to May 17. Due to severe winter storms, the IRS has also extended the tax deadline for residents of Texas, Oklahoma and Louisiana to June 15, 2021. 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 extended 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 may want 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 received and how you receive it has been based on information from your 2018 or 2019 tax return. In the event that your 2020 income provided for a higher stimulus payment than you have or would have received based on your 2018 or 2019 Adjusted Gross Income (AGI), you should receive the difference in the form of the Recovery Rebate Credit when you file your 2020 tax return.
If you owe taxes, do you have to pay when you file?
If you file your completed 2020 tax return prior to the extended deadline and owe money, you don't need to pay until May 17. 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 tax day.
Another benefit of the 2021 tax extension is that it applies to most other tax deadlines as well, including more time to make contributions to individual retirement accounts and health savings accounts and possibly receive tax savings on your 2020 taxes.
- If you still have concerns about your ability to pay your tax bill, even by May 17, 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 2021 tax extension means that if you owe money for 2020 taxes, you can file your return as soon as you're ready and then wait until May 17 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 May 17, it's up to you when to pay—file and pay now, or file now and pay by May 17.
The 2021 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 May 17. 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.
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