The Internal Revenue Service will again give Americans extra time to file their taxes as a result of the pandemic.
Instead of the usual April 15 deadline, filers will instead have until May 17, the agency said Wednesday, an extension that will ease the burden on filers dealing with the economic upheaval caused by the coronavirus, which has put millions out of work or caused their hours to be cut.
“This continues to be a tough time for many people, and the I.R.S. wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic,” said Chuck Rettig, the I.R.S. commissioner.
The one-month delay is not as much extra time as the I.R.S. offered last year, when the filing deadline was pushed to July 15. But it should make it easier for taxpayers to get a handle on their finances — as well as tax changes that took effect just this month with the signing of the American Rescue Plan.
The new law made the first $10,200 of unemployment benefits received in 2020 tax-free for people with incomes of less than $150,000, a significant change for many whose jobs were affected by the pandemic. The I.R.S. said last week that it would provide a worksheet for paper filers and coordinate with tax-software companies. The agency also asked those who were eligible for the tax break but had already filed their 2020 returns not to file an amended return until it had issued additional guidance.
But Mr. Rettig said taxpayers should not unnecessarily delay filing, especially if they will be receiving money back.
“Filing electronically with direct deposit is the quickest way to get refunds,” he said. (Taxpayers who file electronically can generally expect to receive any refund within 21 days.)
The I.R.S. emphasized that the extra time is only for federal returns, not state returns, so taxpayers should check with their state tax agencies about any deadline changes. It also does not apply to estimated tax payments that are due on April 15, which are still due on that day.
Filing quickly also can benefit people whose 2020 income makes them newly eligible for a stimulus payment, or eligible for a larger one. (The latest stimulus bill includes a provision for the Treasury Department to make supplemental payments by September; if you don’t get one by then, you should be able to claim what you’re owed when you file your 2021 taxes.)
And the delay could provide some taxpayers a chance to enhance their chances of receiving stimulus funds by giving them more time to contribute to an individual retirement account or a health savings account.
During last year’s filing extension, the I.R.S. reminded taxpayers that they can make contributions until the due date for that tax year’s return. By contributing money to a tax-advantaged account, they can reduce their 2020 income — potentially making them eligible for stimulus money if they were otherwise slightly above the income limits.
Nope. The so-called economic impact payments are not treated as income. In fact, they’re technically an advance on a tax credit, known as the Recovery Rebate Credit. The payments could indirectly affect what you pay in state income taxes in a handful of states, where federal tax is deductible against state taxable income, as our colleague Ann Carrns wrote. Read more.
Mostly. Unemployment insurance is generally subject to federal as well as state income tax, though there are exceptions (Nine states don’t impose their own income taxes, and another six exempt unemployment payments from taxation, according to the Tax Foundation). But you won’t owe so-called payroll taxes, which pay for Social Security and Medicare. The new relief bill will make the first $10,200 of benefits tax-free if your income is less than $150,000. This applies to 2020 only. (If you’ve already filed your taxes, watch for I.R.S. guidance.) Unlike paychecks from an employer, taxes for unemployment aren’t automatically withheld. Recipients must opt in — and even when they do, federal taxes are withheld only at a flat rate of 10 percent of benefits. While the new tax break will provide a cushion, some people could still owe the I.R.S. or certain states money. Read more.
Probably not, unless you’re self-employed, an independent contractor or a gig worker. The tax law overhaul of late 2019 eliminated the home office deduction for employees from 2018 through 2025. “Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home,” the I.R.S. said. Read more.
Self-employed people can take paid caregiving leave if their child’s school is closed or their usual child care provider is unavailable because of the outbreak. This works similarly to the smaller sick leave credit — 67 percent of average daily earnings (for either 2020 or 2019), up to $200 a day. But the caregiving leave can be taken for 50 days. Read more.
Yes. This year, you can deduct up to $300 for charitable contributions, even if you use the standard deduction. Previously, only people who itemized could claim these deductions. Donations must be made in cash (for these purposes, this includes check, credit card or debit card), and can’t include securities, household items or other property. For 2021, the deduction limit will double to $600 for joint filers. Rules for itemizers became more generous as well. The limit on charitable donations has been suspended, so individuals can contribute up to 100 percent of their adjusted gross income, up from 60 percent. But these donations must be made to public charities in cash; the old rules apply to contributions made to donor-advised funds, for example. Both provisions are available through 2021. Read more.
The I.R.S. expects to process roughly 160 million returns by the end of the year. Nearly 49 million had been processed as of March 5, the 22nd day of the filing season, which started later than usual. Last year, there had been 65 million returns processed by March 6, but that was 40 days into the filing season.
Pressure to extend the deadline had been mounting. The American Institute of Certified Public Accountants said on Tuesday that the pandemic had created “immeasurable hardship,” making it difficult for taxpayers and practitioners to meet the April 15 deadline.
And lawmakers from both parties had called on the Internal Revenue Service to delay Tax Day, noting complicated changes to the tax code in the recently passed economic relief package.
Representative Richard Neal of Massachusetts, the chairman of the House Ways and Means Committee, and Representative Bill Pascrell Jr. of New Jersey, both Democrats, called the extension “absolutely necessary.”
“Under titanic stress and strain, American taxpayers and tax preparers must have more time to file tax returns,” they said in a statement. “And the I.R.S. itself started the filing season late, continues to be behind schedule and now must implement changes from the American Rescue Plan.”
Mr. Rettig will testify about the 2021 filing season before an oversight subcommittee that Mr. Pascrell leads on Thursday.
The delay was reported earlier by Bloomberg News. A congressional aide familiar with the plan initially told The New York Times the deadline was being extended to May 15; that day is a Saturday, and customarily a weekend Tax Day is pushed to the following Monday.
Tara Siegel Bernard and Ron Lieber contributed reporting.