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New Tax Filing Deadline Affects More Than Just Taxes

Tax and retirement planning expert Ed Slott looks at financial aspects to consider now that the tax filing date is later.

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Christine Benz: Hi, I'm Christine Benz from Morningstar. As part of an emergency relief plan related to the coronavirus, the Treasury Department extended the deadline for tax filing to July 15. Joining me to discuss the implications of this for individuals is Ed Slott. He's a tax and retirement planning expert. Ed, thank you so much for being here.

Ed Slott: Thanks Christine.

Benz: Let's talk about this delayed deadline Ed, until July 15th. Initially, the word was that we'd have to file by April 15th, but we'd have until July to pay. Now we don't have to file for another four-plus months. Correct?

Slott: That's correct. They changed the filing date, too, and that's good because they were creating confusion, having one payment date and one filing date, and most people don't realize it's filing late that's worse than paying late. The penalty for late filing is 10 times higher than late paying. So you might've had some people caught up if they didn't make it consistent. So, now the tax return filing date and payment date is moved from April 15th to July 15th.

Benz: Okay. So, do I need to file any sort of paperwork to receive this extension?

Slott: No, no. It's an automatic extension. It's not the extension that you used to file if you wanted to get till October 15th. It's just automatic.

Benz: Okay.

Slott: It's an interesting item on that, because IRS came out with some questions and answers, and one gave us a situation that ended up a little weird to me. This applies to your estimated taxes, so your first estimated payment would be due April 15th, that has been moved to July 15th. But, they didn't extend the date for your second estimated tax payment, which is due June 15th. So now your second payment is due earlier than your first payment. I've never seen that one before.

Benz: Interesting. So, if people have those estimated tax payments coming out of their accounts on autopilot, should they look at that and potentially undo that for this coming payment for the first quarter?

Slott: They can. You know, some people just like to pay it and get it over with, but you don't have to. But, there's going to be some unusual stuff going on where people sometimes have an overpayment and they credit part to the first one, so it's going to be credited to the July 15th when June is owed earlier. I think if you work with a tax preparer or you're doing it yourself, you're going to have to see which payment, obviously the June payment is going to come first and you may want to adjust that.

Benz: Okay, so a question is, I can file on time, correct? So, if I've done my return and it looks like I'm going to be getting money back, no reason to delay.

Slott: Oh no. Why would you delay if you have a refund coming? This is only for people, it's designed for people who would've owed a lot of money and to ease that pressure. If you owe money, you can file up to July 15th, but anybody can file up to July 15th. But, why would you wait if you're owed money, that you're owed a refund?

Benz: Let's discuss the other deadlines that were April 15th, like IRA contributions. Are those being pushed back? So, if I wanted to make an IRA contribution, have it count for 2019, I have until July to do that.

Slott: Yes, that was moved back. It wasn't moved back as part of this, but the way the tax law works, the deadline for making a contribution to an IRA for a prior year, say 2019, was always the tax filing date for that year and it was never extended. Even under normal rules, even if your return was on extension, you did not get an extension on that April 15th date to make an IRA or Roth IRA contribution for the prior year, and that's still the case. But, because it's tied to the tax filing date, when they move the tax filing date, they automatically move the date for making an IRA contribution for 2019. So, you have until July 15th to make a Roth IRA or IRA contribution for 2019, even if you filed your return before that.

Benz: 2019 health savings account contributions would be in the mix, too?

Slott: Right, right, and the medical savings accounts, too. Yes.

Benz: Okay.

Slott: And IRS has confirmed that.

Benz: What about the usual extension that people can request until the end of October? Will that still be available and will that date be the same?

Slott: I don't know about that yet. I haven't looked into that. As it is now, you still have until October 15th. There was some question people were asking, Are you going to get three months on that? I don't think that's going to happen because that would push it into the next year, and then you're filing '19 returns in 2021. I don't think that's going to happen.

Benz: Okay Ed, thank you so much for taking time out of your busy schedule to be with us today. We appreciate it.

Slott: Thanks Christine.

Benz: Thanks for watching. I'm Christine Benz from Morningstar.com.