Due to the coronavirus pandemic, the 2020 income tax filing season has been extended for an additional 90 days. This gives taxpayers affected by the virus, quarantines, or mandatory shutdowns the opportunity to attend to more urgent matters or simply delay paying their income tax until July.
However, just because you can choose to wait, the question is whether or not you should. Are there good reasons to file on time even with the automatic extension? The answer is yes, but not for everyone. To help you decide the right timing for your income taxes, here are some of the most significant reasons to make either choice.
The Pros of Filing Early
Certainly, the biggest 'pro' about filing on time or even earlier than the traditional date is for those who might get a refund. During the pandemic, many Americans — both households and businesses — could use an extra influx of cash from their refunds. And even if you're not sure whether you will receive a refund, you can file and still not have any tax due until July 15.
Aside from refunds, those who file now give themselves more time for tax planning for 2020. When you know your numbers early in the year, you can make larger-scale changes. In contrast, if you don't have any firm numbers until July, you have fewer months to prepare for and manage what the second half of 2020 might bring.
The Pros of Filing Later
Waiting, of course, has its advantages. If your life and emotional health have been turned upside down by this public health crisis, you may not be able to deal with the added burden of handling tax issues right now. If it will cause added stress in your life, there is nothing wrong with opting to put off this one task until the time is more convenient.
An extension of the deadline also gives some people more time to plan for 2019 taxes if they can. How can you plan after the fact? You may be able to make additional contributions to tax-advantaged accounts that reduce your 2019 tax liability. You also have an additional three months to plan how you might pay an amount you know will be due. And, of course, if you need to locate expense documentation or correct form errors, you have time.
There is no single right or wrong answer as to when to file your income taxes during this challenging time. For the best results, meet with your tax planner now to go over all your options and decide together what is the right decision. You will, then, have at least one thing somewhat under control as you face this critical time. For more information, contact companies like Hammernik Associates.