6 things to consider one month ahead of the tax deadline

6 things to consider one month ahead of the tax deadline
(Image credit: Pixabay)

In most years, the tax season would have been over by now. But with COVID-19 continuing to complicate so many aspects of everyday life, the Internal Revenue Service (IRS) has once again extended the tax filing deadline, and this year set it to May 17

Of course, many millions of Americans will have already dutifully filed and been able to retire their tax software for another year. But having been afforded the luxury of an extra month to file if they so wish, a huge number of taxpayers will still leave everything to the last minute, safe in the knowledge that the threat of late-filing penalties is not yet a reality.

If that includes you, it’s still best not to let complacency set in, and to be aware that there is now under a month until that final deadline will arrive. In the coming days and weeks, therefore, take heed of the following six tips that all filers should consider with the end date of May 17 firmly in mind. 

Check your state tax deadline

Even if you think you have time in hand to get your taxes prepared, it's definitely worth double-checking that the deadline you have in mind is the one you think it is. The reason for this is that the May 17 extension applies to federal income taxes, and that the due date for filing state income taxes, in contrast, is not always consistent across the board. 

According to AICPA, 36 states have extended their tax filing and payment deadlines to May 17, while Iowa (June 1) and Maryland (July 15) are giving even longer. On the other side of the coin, Hawaii and New Hampshire gave their residents no additional time beyond the usual April 15 deadline to file their state taxes. 

Further disparities regarding filing and tax payment due dates are apparent too, so if you're unsure, definitely take the time to check out your state’s department of revenue website for information specific to where you live. 

File if you’re expecting a refund

Taxpayers who are anticipating a tax refund are probably best filing sooner rather than later. Over half of Americans are relying on their refund to boost their finances this year, so if you're among them, there could be a more-than-useful sum of money waiting for you right there at the IRS. 

6 things to consider one month ahead of the tax deadline

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The majority of filers will qualify for a refund, with the sums involved often running into several thousands of dollars, so these are amounts that no-one will want to miss out on. Importantly, if you’re entitled to a refund for 2017, you are now in the last-chance saloon for filing a prior year tax return to make sure that payment finds its way to you. 

The IRS will issue most tax refunds within 21 days of accepting a tax return, but filing online and opting to have the funds sent via direct deposit is the best way of getting your refund fast. 

Also remember that your tax return is key to securing stimulus checks. Indeed, right now the IRS is sending "plus-up" payments to people who have recently filed and the agency has just realized, as a result, are actually owed more relief money than they were originally paid. 

Claim for every deduction

To keep your tax bill as low as possible, making the most of the various deductions and credits that are applicable to you is a must. Of course, this means claiming for things such as mortgage interest  if you're a homeowner, child tax credit if you're a parent, medical expenses, and student loan interest deduction, and so on. 

This year, however, with more people working remotely, it's particularly important to be across the home office deduction rules, which may not be as favorable you'd think. And if you've spent big on personal protective equipment due to COVID, it's worth noting that face masks and hand sanitizer are tax deductible too. 

The filing process might be a little different

Another side effect of the coronavirus that has carried over from last year has been the challenge it has presented to the IRS in the processing of paper tax returns. As a result, taxpayers are once again being urged to file electronically to make the process both safer and speedier than sending your documents through the mail. 

It's also possible to make tax return amendments online now too, although only in relation to tax year 2019 and 2020 returns. 

6 things to consider one month ahead of the tax deadline

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If you’re filing online for the first time, gather together all the information you would need if you were filing a paper return, then visit the IRS website for advice on how best to proceed. If your income was $72,000 or less last year, you should be eligible to use IRS Free File software. For those with more complex filing requirements, tax programs are there to help.  

Contact your tax preparer

If you usually have a tax preparer ready everything on your behalf, it might be worth checking on their availability now. As with last year, COVID-19 has thrown the normal working lives of most people out of shape, and tax professionals will be no different. There is also a chance they will have more customers demanding their services than usual, so make sure you schedule your slot early, ahead of the inevitable last minute rush.  

Is May 17 still not long enough? 

If you fear the May 17 deadline still doesn’t give you enough time to file, it is possible to ask the IRS for an extension until October 15. You can request this extra time by filing Form 4868 through your tax preparer, tax software, or the Free File link on IRS.gov. 

Importantly, the form only allows an additional three months in which to file a federal tax return - you’ll still need to pay your taxes by May 17 in order to avoid possible penalties. For this reason, the extension form asks taxpayers to estimate their tax liability and pay this estimated amount. 

Tim Leonard

With over 20 years’ experience in the financial services industry, Tim has spent most of his career working for a financial data firm, where he was Online Editor of the consumer-facing Moneyfacts site, and regularly penned articles for the financial advice publication Investment Life and Pensions Moneyfacts. As a result, he has an excellent knowledge of almost areas of personal finance and, in particular, the retirement, investment, protection, mortgage and savings sectors.