As 2019 draws to a close, many are preparing (read: dreading) to file their taxes come April 2020.
Taxes are due April 15, 2020. Missing the deadline can open the door to unwanted penalties. Failure to pay on time means the IRS can issue charges of up of 25% of the unpaid taxes. 60 days late to file, and the IRS can issue a penalty of 100% of taxes owed or $210, depending on which is less.
Luckily, an extension can be requested. For those who could file for 2018 on time, they had until October 15, 2019. That same date holds for extensions for filing for 2019 but obviously for 2020.
For those who make quarterly payments, there are more dates to consider. In this case, the IRS requires the self-employed, contractors, investors, and others not subjected to payroll taxes, to quarterly payments. The IRS divides the year into four periods, requiring payments on April 15, June 15, September 15, and January 15, 2020.
Aside from payments there are several things worth considering before filing for 2019, like getting caught up with old returns. For those expecting a refund for 2016 but neglected to file, the April 15 deadline is the last date to submit a 1040 and claim it. Failure to do so and the refund is forfeit. Many ignore following up on refunds, which is why more than $1 billion went unclaimed by 2014 tax payers.
Before filing, many may want to check in on their 401(k). To lower taxes for the year, putting away $19,000 into a 401(k), the limit set for 2019, will lower the amount of income that will be taxed. Depending on your employer, that increased saving may meet a portion that they’ll match and contribute to a 401(k).
IRA’s can also help out with taxes for 2019. Any money put into an IRA is a tax deduction, so long as the contribution is made before the April 15, 2020 deadline but there’s a limit of $5,000. For those over 50, that limit is raised to $7,000.
A health savings account, a good investment no matter the time, can also lower taxes. Individuals with insurance that come with high deductibles can open such an account to assist with medical costs. For 2019 the limit has been set for $3,500 one person, or $7,000 for a family, and as long at these contributions are made before April 15, 2020 they can be deducted from taxes for the year.
The April 15, 2020 deadline is firm and missing it can affect a filer’s finances. But that could change depending on where they live. While most states stick to the federal tax deadline issued by the IRS, certain states may have a different date for their tax department. Those living in Texas, South Dakota, Nevada, Florida, Alaska, Wyoming, or Washington don’t have to consider this and can focus on the federal filing date.
Even with the best of intentions and preparations, some may not be ready in time. Getting an extension requires the IRS Form 4868 to request a six month extension. While this extends time to file, payment is still expected, partially or in full, by April 15, 2020. To avoid late-payment penalties and increase chances for an extension, payment ought to be made along with filing Form 4868.