5 tax tasks to take care of by May 17
Monday, May 10, 2021
Reviewed and updated May 15, 2021
Tax Day 2021 for most U.S. taxpayers is just a week away.
Procrastinators' focus obviously is on finishing up those 1040s. But there are some other tax tasks that, if they apply to your tax situation, you should take care of or at least consider by May 17.
1. Contribute to an IRA: Putting as much as you can into an individual retirement arrangement, or account as most of us call it, is always a smart move. The IRA will grow over the years, giving you some cash when you're ready to call the cubicle farm quits.
An IRA contribution also is one of the few tax-saving moves you can make as late as the annual tax-filing deadline. For most filers, that's May 17 this year. By doing so, you can credit the money to the prior tax year. Then you can put in more for the current year.
The amount you can contribute to either type of IRA is adjusted annually for inflation. That's been low of late, so for both 2020 and 2021, you can put up to $6,000 in an IRA. If you're age 50 or older, you're allowed to add another $1,000 each year as a catch-up contribution.
You have a choice of a traditional IRA or Roth version. For some, a traditional IRA is worthwhile because it also provides an above-the-line (no itemizing!) tax deduction on Schedule 1. Others opt for a Roth IRA because this type of retirement account is funded by already taxed money, meaning your retirement withdrawals are tax-free. And don't forget that by contributing to either, you also might be able to claim the Saver's Credit.
2. Contribute to an HSA: If you're covered by a high-deductible health plan – that's one that in 2020 had a minimum deductible of $1,400 for individuals and $2,800 for families – you also have until the tax-filing deadline to make a prior-year contribution to a corresponding Health Savings Account (HSA).
An HSA is a tax-favored way to save money to pay those high deductibles. HSA contribution limits for 2020 are $6,900 for individuals and $13,800 for families. And like a traditional IRA, HSA contributions are tax-deductible without having to itemize.
3. Collect your 2017 tax refund: Around 1.3 million people were due a tax refund on their 2017 returns, but never got around to filing the back in 2018. They need to act by May 17, or the Uncle Sam gets to keep that money. Forever.
And it's a lot of money. The U.S. Treasury is holding on to more than $1.3 billion in taxes that were overpaid back in 2017. The Internal Revenue Service says that the median unclaimed refund amount for that year is $865, but yours could be less or more.
So what are you waiting for? Again, if you fail to act, you lose the money. You can find more on how to claim your old refund in my earlier post on filing 2017 returns by May 17, 2021, to avoid losing that old refund forever.
4. Claim your 2020 COVID-19 economic impact payment: By now, you know that two coronavirus-related relief payments were approved in 2020. And by now, most eligible taxpayers have already received (and spent) that money, which was worth $1,200 and $600 per person, plus some more for qualifying dependents.
But most is not all. You may not have received one or either of the economic impact payments (EIPs), or got less than the maximum amounts, because the income information that the IRS had on file for you showed that you made more than the allowable income thresholds.
The income caps for full EIP distribution were $75,000 a year for individuals, $150,000 a year for married couples filing jointly and $112,500 a year for people filing as heads of household.
If, however, your 2020 earnings were lower than in 2019, that could mean you're now eligible for additional EIP money. You can get the amount due by claiming the Recovery Rebate Credit (RRC) on your 2020 tax return.
OK, it's true that you can still claim your 2020 RRC if you get an extension to file and then submit your return by Oct. 15. But why wait and leave that extra money sitting in the U.S. Treasury?
5. Get an extension to file: About that extension. If you know you just aren't going to get around to finishing your 2020 Form 1040, then file Form 4868. That will automatically give you until Oct. 15 to complete and file your tax return.
Be sure, though, to pay any tax you know, think or accurately estimate you'll owe with your 4868 form. This extension, usually for six months when Tax Day is in April, but now for five more months, is only for filing your forms. It's not an extension to pay any due tax. If you don't pay by May 17, you end up owing late payment penalties and interest.
Not May for millions: While lots of folks are scrambling this final week to get their 2020 returns done and to the IRS, others have more time. Unfortunately, the reason for many of those IRS-approved filing delays is because earlier this year, they had to deal with some disastrous weather.
I know I just blogged about this over the weekend, but if you took a break (good for you!) and missed that post, here's a rerun.
The historic and severe winter storm that in mid-February incapacitated parts of the middle-south means a June 15 Tax Day for taxpayers in Louisiana, Oklahoma and Texas. Residents of these three states also have until mid-June to make 2020 IRA contributions.
Flooding and other destructive storms in late February mean some Kentucky taxpayers now have until June 30 to file and make 2020 IRA contributions. Similarly, tornadoes and straight-line wind damage in Alabama allows some taxpayers in that state until Aug. 2 to file and, you got it, and make 2020 IRA contributions. And just before Tax Day 2021, some Tennessee taxpayers also got a new Aug. 2 tax filing and 2020 IRA contribution deadline due to tornadoes and flooding there in late March/early April.
Also, June 15 is the regular annual filing deadline for U.S. citizens and resident aliens who live outside the country and Puerto Rico. This mid-June deadline also applies to members of the military posted outside the United States. It could be even later for military service men and women and eligible support personnel who serve in a combat zone.
Ready to finish up your taxes? And contribute to money- and tax-saving accounts? And get all your COVID cash? And more?
Good! Get to it. You've got plenty of time.
You also might find these items of interest:
- Three retirement plans that also offer tax savings
- No itemizing needed to claim these 23 tax deductions
- 2021 Tax Tips' advice on filing and more in each monthly page: January, February, March, April & May
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