Tax day is rapidly approaching, and if you haven't filed it's time to start working on it.
Yes, you read that right. Tax day this year is July 15. That also means you have until that date to make a prior-year contribution to some retirement funds, and possibly get a tax writeoff.
Tax Deadline Extended
While the income tax payment and filing deadline as well as the related Individual Retirement Account (IRA) contribution deadline are normally on April 15, this year that date was extended 90 days due to the COVID-19 epidemic.
The new date to file your 2019 federal taxes is July 15, 2020. The date for making your 2019 IRA contributions was also extended to that date.
Some states also extended their filing deadline to match the federal filing deadline.
If you can't pay your 2019 taxes by the new date you may still have other options. To get an extension, you have to file an IRS Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. But you still have to make an estimated tax payment to Uncle Sam by July 15 to avoid penalties and interest on your 2019 tax bill.
If you believe you may have problems making your estimated tax payment by July 15, the IRS offers several payment alternatives. If you contact the IRS to make payment arrangements you may end up paying less in penalties and interest. If you enter into an installment payment agreement with the IRS your penalty rate is cut in half from 0.5% 0.25% per month.
Most taxpayers who cannot pay in full have the following payment options:
- Online Payment Agreement -- If you owe $50,000 or less in income tax, you can qualify for this option. You can set a payment agreement up online at IRS.gov/opa.
- Installment Agreement -- If you don't qualify to use the online payment agreement option, or choose not to use it, you can apply for a payment plan by phone, or by mail.
- Temporarily Delaying Collection -- You can contact the IRS to request a temporary delay of the collection process. The IRS may delay collection until your financial condition improves. Penalties and interest continue to accrue until the full amount is paid.
- Offer in Compromise -- Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise. Check out the IRS website for more information.
If none of these options are workable for your situation, the IRS suggests that getting a loan to pay your taxes may be cheaper than letting the government charge you penalties and interest on your unpaid liability.
Another deadline coming due this year three months later than usual is the IRA contribution deadline.
Normally, you can make IRA contributions for the previous year up until the tax filing deadline.This year, thanks to the tax filing deadline extension, the IRA contribution deadline has also been extended until July 15. Normally, IRA contributions have a dollar limit which changes annually. For 2019 that limit is $6,000 if you are under age 50 and $7,000 for those age 50 and older.
So, if you didn't put any money into an IRA for 2019, you can still open one and contribute the maximum amount for last year. This is true for conventional and Roth IRAs as well as SEP-IRAs for self-employed people.
Contributions to other retirement plans like a 401(k) or the Thrift Savings Plan (TSP) may only be made during the calendar year, there is no extension available.
Get the Latest Financial Tips
Whether you're trying to balance your budget, build up your credit, select a good life insurance program or are gearing up for a home purchase, Military.com has you covered. Subscribe to Military.com and get the latest military benefit updates and tips delivered straight to your inbox.