When the Internal Revenue Service moved the 2020 deadline for filing individual income tax returns from April 15 to July 15, it apparently also gave millions of taxpayers a green light to wait until the last minute to file their taxes.
CNBC reports that the IRS is behind last year’s number by almost 9.5%, with 128 million individual returns filed so far in 2020 compared to 141.5 million filed by this time last year. The network reports the number of refunds also lags behind last year’s levels, down nearly 14%.
Refund amounts, however, are up, with the average refund putting $2,779 in the bank — up some $50 from 2019.
Are taxpayers working the system?
Tax professionals don’t seem all that surprised that taxpayers are taking advantage of a much larger window to file and pay their taxes.
“Part of it is people taking advantage of the July 15 deadline, and I bet some of that has to do with CPA firms as well,” said Matt Rosenberg, CPA and member of the American Institute of CPAs’ Financial Literacy Commission.
But Rosenburg sounded a cautionary note to CNBC, saying it’s a much smarter idea to take stock of your tax situation now while there’s still time.
“It’s nice to have the extra time, but I still encourage people to calculate their tax liability right now,” Rosenberg said. “If you’re able to claim a refund, you can take it. If you owe, you have an opportunity to budget and pay for it.”
What are strategies for the extra time to file?
CNBC has a few ideas on what taxpayers can do to improve their tax picture while waiting for the July 15 deadline:
- Put away more savings if they can. Taxpayers have until July 15 to save up to $6,000 in an IRA and have the contributions count for 2019. If the taxpayer is 50 or over, the limit is $7,000.
- Put more money into an HSA and have it count for 2019. Taxpayers can save on a tax-deductible or pre-tax basis in an HSA and have the cash grow tax-free. Money withdrawn to pay for qualified medical costs come out tax-free. (CAUTION: Taxpayers can only fund an HSA if they have a high-deductible health plan.)
- Search for additional deductions and credits. Taxpayers can look over their statements to see if they qualify for tax extenders — tax breaks that have to be renewed by lawmakers every year.
- Know your state date. While most states have also pushed their tax-filing deadlines back, not all of them have. The American Institute of CPAs has a handy list of states and their deadlines.
Finally, CNBC advises not to play games with taxes. If you have the money to pay your 2019 tax bill, you’re better off just doing it. Taxpayers who invest the money that could be better used paying their tax due are walking a razor’s edge.
“Investing the money if you don’t have to pay it right away is risky,” Rosenberg said. “The rate of return you get is low on anything that’s safe and probably isn’t even worth the headache.”
Our thanks to CNBC and reporter Darla Mercado for the original article.
LEAD Financial Solutions, LLC