Taxes on the move
Photo by Kelly Sikkema on Unsplash
Things have been a little less than concrete since the pandemic and the IRS isn't much different when it comes to tax returns and reform. What changes should you know about and discuss with your tax professional? Below are a few things to consider...
1. Relax and enjoy Some Extra Time to File...well - Maybe
We have mentioned in previous blog posts that the deadline to file your return and make those payments has shifted to May 17th. This was done to help us all as some Americans struggle more than others through the pandemic. More than likely the IRS is behind schedule as well. Great news for those of us who like to drag our feet and get things done. Don't forget to check your state deadline versus the federal extension as they don't necessarily match.
2. More time for...
Let's not forget the people who like to delay filing or request an extension typically wait till the last minute to fund their IRA's and other tax-advantaged accounts. More time to file means more time to save and that includes your contributions to IRA's, HSA's, and college savings plans.
3. What about estimated tax payments?
The news about the extension is more time to file, get your tax documents in order, and carefully file for an accurate return. The delayed filing deadline applies to those who pay estimated tax, but it does NOT delay the due date for estimated payments to be made.
4. Understand the power of paying now versus later
You might be like a ton of us who hear tax savings today, reduce your tax bill now, and other ways of using tax deferral and tax deductions to help your situation. Talk to your tax advisor and if your younger, have a long time horizon, the benefits of prepaying taxes now eliminate 100% of the tax down the road. Of course, we're talking about Roth IRA or Roth 401(k) contributions.
5. Knowledge is power
Talk to your tax person about any legislation changes, deadlines, or strategies. If you don't have a trusted CPA or tax professional - get one! Find someone you trust and can relate to. Fee schedules vary quite a bit and the advice they give can be quite different as well. There are a ton of variables to consider so like most consulting it is more of an art than a science. If things were as simple as using a formula, everyone would use the same calculator and do what's best for their situation.