WASHINGTON, D.C., USA — With so much going on the word with the COVID-19 pandemic, you may have forgotten about your taxes. Or you just may be avoiding them.
The extension we got because of COVID-19 helped those worried that they couldn't pay their tax bill, given how many lost their jobs, or are still waiting for their stimulus checks.
But for some, it’s still not enough.
Jacqueline Hyter is one of them. She says, "I'm a single mother with three kids, so you can imagine the struggle prior to a pandemic. Add a little pandemic on that and we have a nightmare "
Despite the fact we were given a three-month filing extension from the Feds, the IRS says the number of people who've filed is down versus this time last year.
But if you don’t file by the July 15th deadline, you will pay big time later. Much more than you would if you were simply late and didn’t pay your tax bill.
Jeff Warnkin, a financial advisor with the JL Smith Group says, "The failure to file penalty is very high. It's 5% of the tax due per month up to a maximum of 25% of the tax due.”
You can avoid it by filing an extension. And there are some great tax benefits that could offset your bill before you actually send in your return.
One suggestion is put money into a Health Savings Account.
Warkin says, "You get a deduction for the money you put in. It grows tax deferred. And when you take the money out on the back end, if you use it to reimburse for medical expenses, it comes out completely Federal and State tax free."
You can also contribute to a tax deductible IRA, or even buy stocks. That's something Steve Eisenberg, who didn’t even make enough money last year to file taxes, will be doing.
“What I really would like to do, is try to see if I can get some money to grow, and have enough to maybe take a portion of that and put it into the non-profit I'm trying to start. So then it becomes charitable," Eisenberg says.
Now despite the fact you have to file and pay on time, if you're due a refund, sit tight.
The IRS was understaffed before the pandemic. Now that they’re still dealing with stimulus checks as well, tax return processing is down ten percent this year.
And then there's this.
"There's so much fraud that has occurred in the last several years,” says Kathleen Indiano of Indiano & Company CPAs. “The IRS has had to put, what we call fraud filters up on their systems, and that has delayed the refunds for about 71% of returns."
The good news is that the IRS has to pay you interest if your refund doesn't arrive 45 days after filing. It’s 3 to 5 percent, depending on when you file.
Finally, while your stimulus check is not taxable, your unemployment benefits are. So make sure to change your withholdings, or file estimated taxes to avoid a nasty surprise next year.
If you’ve already filed your tax returns and would like to make changes, here’s how:
Click here to see where to file your taxes for free.
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