It’s Not Too Late to Save 2020 and 2021

By Colleen Gillespie, CTFA, AIF®

Okay, that headline is a bit misleading as I’m trying to be witty. It should read that it is not too late to save for 2020 and 2021. Below is a news release from the IRS delaying tax filing and payment dates for 2020 until May 17, 2021. This means that you can also contribute $6,000 ($7,000 if you are over 50) to a Roth or Traditional IRA and have it count for 2020. The same amounts apply to 2021. Because there are certain restrictions for both types of IRAs, please contact us if you are interested in learning more. SEP IRA owners also receive the extended deadline to make contributions.

Do you have a high deductible health insurance plan? If so, the deadline to fund a health savings account for 2020 has also been pushed back to May 17. HSAs are maxed at $3600 per year for individuals and $7200 for families. There is also a catch-up provision for those age 55 or older to contribute an additional $1000. If you haven’t met these limits and have extra money, then contributing can be helpful in the long run as the accounts grow. As always, we are here to answer any questions or strategize on what would be best for you.

From an IRS News Release - IR-2021-59, March 17, 2021

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

"This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities," said IRS Commissioner Chuck Rettig. "Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to."

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn't subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.