The May 17 tax deadline is coming up: Here's everything you need to know
Americans have just a few more days to file their 2020 tax returns — or risk facing a financial penalty.
This year, the IRS extended the traditional tax-filing deadline from April 15 to May 17, giving most taxpayers an extra month to prepare their filings amid a slew of pandemic-related policy changes included in the $1.9 trillion American Rescue Plan.
As of May 7, the IRS had processed about 116 million returns. By comparison, it had received about 126.7 million returns. The agency has issued roughly 84 million refunds so far, down 3.2% from this point in 2020.
If you haven’t filed yet, here’s what you need to know:
Taxpayers can request an extension to Oct. 15
If you haven’t filed your taxes yet, don’t worry — there’s still time to request an extension to Oct. 15. If you’re an individual, you can file for an extension online by filling out Form 4868 using the IRS’s "Free File" tool. The form requires an estimate of your tax liability.
But beware, if you owe taxes to the federal government, payments are still due on May 17. The IRS offers some payment plans to individuals who are unable to pay their taxes in full. The more you pay by May 17, the less interest and penalty charges you’ll owe.
You should file your taxes online if possible
Filing your taxes electronically is the fastest way to get a refund, according to the IRS, especially as the agency works its way through a backlog of paper returns that built up last year during the coronavirus pandemic.
The agency says that it issues about nine out of 10 refunds in less than 21 days. In 2018, about 90% of taxpayers filed their returns online.
There’s still time to contribute to your IRA
The deadline for Americans to make contributions to their IRA for 2020 is May 17. The maximum annual contribution for traditional and Roth IRAs for most Americans is $6,000. If you're over the age of 50, you can add an additional $1,000.
Traditional IRA contributions may be tax-deductible – withdrawals are typically taxable – although there are several complicating factors, including income limits and whether you or your spouse are covered by a workplace retirement plan.
For instance, your deduction may be limited if you or your spouse are covered by a retirement plan at work and your income exceeds certain levels. But your deduction is allowed in full if you aren't covered by a retirement plan at work, according to the IRS.
Your refund might be delayed
The IRS is holding more than 29 million tax returns for manual processing, delaying refunds for many low-income Americans, according to its internal watchdog.
"As one would expect, IRS employees are stretched thin working through the manual processing of these returns," National Taxpayer Advocate Erin Collins wrote in a recent blog post. "So if a taxpayer’s return is pulled for manual processing, there will be delays."
At least 8 million returns have been placed in "suspense" until an IRS employee can review them to ensure the taxpayers received the fully promised stimulus check money. IRS officials are also calculating the earned income tax credit and the child tax credit – two tax credits for lower-income Americans that were expanded in President Biden's $1.9 trillion coronavirus relief package.
On top of that, 5.3 million 2019 or 2020 paper returns are awaiting manual processing, while 4.7 million returns have processing errors or fraud identification issues that require a response from the taxpayer. The IRS withheld 11 million business returns for manual processing.
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"From a taxpayer’s perspective, it feels like their return has fallen into a black hole: they do not know what is going on, when they will get their refund, why it is being delayed, or how to get answers or help," Collins wrote.
In addition to a high volume of 2020 returns that need manual processing, the IRS is grappling with a massive backlog of processed 2019 paper tax returns and the herculean task of delivering millions of stimulus checks.
Collins estimated that just 1 out of every 50 calls to the IRS customer service representative service line is being answered.
Read more at FOXBusiness.com.