GET BREAKING NEWS IN YOUR BROWSER. CLICK HERE TO TURN ON NOTIFICATIONS.

X

PUBLISHED: | UPDATED:

With the traditional tax filing date of April 15 come and gone, we’re now in a tax twilight zone. Tax pros accustomed to a busy season of working nights and weekends have had their sprint turn into a marathon. In case you missed the news due to a deluge of coronavirus headlines, most of us have until July 15 to file and pay our federal and state income taxes. Should you use this reprieve from the IRS? Consider these points when deciding when to file and pay.

David Gardner For the Camera
David GardnerFor the Camera

Prepare your return, then decide. Rather than wait until July, prepare your return (or ask your tax pro to do so) soon so you can weigh your options. If you’re due a refund, in most cases you should not wait to file your return. In contrast, if you owe the IRS and your state you may want to wait until July. This includes Colorado, which has largely harmonized its deadlines with the IRS. Just make sure the money you owe is socked away in a high interest savings account to earn something on your cash.  

Stimulus payment details. The Coronavirus Aid, Relief, and Economic Security, or CARES, Act signed last month includes a stimulus payment for over 90% of households by some estimates. The refundable tax credit is $1,200 per taxpayer and an additional $500 per child age 16 or younger. By the time you read this, it may already be in your checking account.  

For example, a married couple with two children ages 5 and 8 could qualify for a $3,400 payment. If you received your previous refund through direct deposit, the stimulus payment should go to the same account. You can check the status of your stimulus credit or arrange for direct deposit at irs.gov/coronavirus/get-my-payment.

Higher income earners will find their stimulus payment reduced or eliminated. Individuals with an adjusted gross income, or AGI, over $75,000 and couples filing jointly with an AGI exceeding $150,000 are subject to the phase out rules. For example, if the married couple above had an AGI of $180,000 in their last filed tax return, then they would receive a net $1,900 stimulus payment.

If you’re in that higher income category, you may want to wait to file your taxes if your income was lower in 2018. The stimulus payment is based on your last filed return whether it’s 2018 or 2019.  If on the other hand your income went down in 2019, consider filing soon to maximize the stimulus payment.

The latest news is there are apparently no “clawback” provisions as part of the stimulus credit. If you qualify for 2018 and don’t for future years, it’s yours to keep. You can even collect it based on your 2020 income when you file taxes next year. Note you only can receive a stimulus payment based on one tax year — 2018 if that’s the last return filed, 2019 in most cases, and 2020 for those who didn’t qualify for this round.  

Children introduce additional factors. The best filing time could change if you have children who were born or turned 17 last year. The IRS looks at how many children younger than 17 you had at the end of the tax year. If your child turned 17 in 2019, consider waiting to file as it’s possible you could qualify for the $500 credit. If on the other hand your child was born in 2019, you may want to file your taxes sooner to hasten the credit. 

Other tax deadlines change. In addition to the tax filing date change, the deadlines for 2019 Roth IRA, Traditional IRA, and health savings accounts also have been extended to July 15.

Finally, if you make regular estimated tax payments because of your business or investment income, the first two payments for 2020 normally due on April 15 and June 15, have both been delayed until July 15.

David Gardner is a Certified Financial Planner practicing in Boulder County.  The opinions expressed by the author are his own and are not intended to serve as specific financial, accounting, or tax advice.

blog comments powered by Disqus