On Tuesday, the White House announced some details on how taxpayers will be able to defer any tax payments they might have.
“If you owe a payment to the IRS, you can defer up to $1 million as an individual,” said Treasury Secretary Steve Mnuchin, adding that the payments would be “interest free and penalty free for 90 days.”
“All you have to do is file your taxes; you’ll automatically not get charged interest in penalties,” Mnuchin said during a coronavirus briefing with President Trump looking on.
But another tax-day ritual isn’t changing: You still have to file by April 15.
Texas Congressman Kevin Brady, the ranking Republican on the House Ways and Means Committee, made that clear in a press release: “Taxpayers should file by April 15 as normal and the deferral will be applied automatically.”
The process for getting an extension remains the same as any other year: You have to file form 4868, giving taxpayers until October 15 to file a return and pay anything owed.
RELATED: Take a look at these super simple ways to lower your tax payments:
5 ridiculously simple ways to lower your taxes
5 ridiculously simple ways to lower your taxes
1. Contribute more to a retirement account
If you put money into a traditional IRA or 401(k) plan, you'll benefit in two ways. First, you'll get the financial security that comes with having savings available in retirement, and the earlier in life you start contributing, the more opportunity you'll give your money to grow. But you'll also benefit from a tax perspective, because the amount you contribute will go in pre-tax. What this means is that if you make $50,000 a year but put $5,000 into your 401(k), you'll only pay taxes on $45,000 of income. Talk about a win-win!
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2. Donate items you no longer use
Is your basement or hall closet overflowing with clothing, tools, and gadgets you don't need? If you donate those items to a registered charity, you'll get to claim a deduction on your taxes. All you need to do is obtain an itemized receipt of what you give away to verify your donation, and you're all set.
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3. Open a flexible spending account
Medical care can be a huge expense for some families. Americans spent an estimated $416 billion on out-of-pocket medical expenses in 2014, and that number is expected to climb to $608 billion by 2019. But if you sign up for a healthcare flexible spending account (FSA), you'll get to pay for eligible medical expenses, like copays and prescription drugs, with pre-tax dollars. For 2016, you can allocate up to $2,550 to an FSA, which means that if your effective tax rate is 25%, you'll save $637 by contributing the maximum. But don't make the mistake of overfunding your FSA. The money you contribute goes in on a use-it-or-lose-it basis, so if you put in the full $2,550 but only rack up $2,000 in eligible expenses, you'll have to kiss that remaining $550 goodbye.
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4. Use pre-tax dollars to pay for child care
Childcare is one of the greatest expenses families with young children face. The average American household currently spends $10,192 a year on full-time day care center care, $7,700 a year on regular after-school babysitting, and $28,900 on a full-time nanny. The good news, however, is that you can shave a fair amount of money off your tax bill by opening a dependent care FSA. Similar to a healthcare FSA, a dependent care FSA allows you to allocate pre-tax dollars to pay for eligible child care expenses, which include preschool and summer camp. For 2016, a couple filing a joint tax return can contribute up to $5,000 a year in pre-tax dollars. If you max out that limit and your effective tax rate is 25%, you'll save $1,250 in taxes. The only catch is that like a healthcare FSA, if you end up spending less during the year on eligible expenses than what you put in, you'll forfeit your remaining balance.
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5. Sign up for commuter benefits
Traffic and rail delays can be a huge source of daily aggravation. But if your commute can't serve the purpose of helping you relax and ease in and out of your workday, it can at least help you lower your taxes. All you need to do is sign up for commuter benefits through your employer, and you'll get to use pre-tax dollars to pay for the costs you already incur. For 2016, you can allocate up to $255 per month in pre-tax dollars for transit and up to $255 a month for parking for a combined total of $510. If you hit that maximum and your effective tax rate is 25%, you'll save $1,530 a year on your taxes.
Nobody likes paying taxes, and there's certainly no reason to pay more than you have to. With a few smart moves, you can lower the amount you ultimately fork over to the IRS and keep more money in your pocket.
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Getting clarity on the issue has been challenging. On March 10, Democratic lawmakers on the Ways and Means Committee sent a letter to the IRS to try find out more about any changes for the filing season. “We request your continued evaluation of whether there is any need to extend the tax filing season beyond the April 15 deadline” they wrote.
A spokesperson for the committee confirmed Wednesday morning that it has yet to receive a response.
On Monday, Congressman Tom Suozzi, a Democrat who represents parts of Long Island and Queens, followed up in a statement. “I am now calling on the Treasury Secretary Mnuchin and IRS Commissioner Rettig to extend the deadline to file tax returns,” saying we need to ensure financial security “by giving people the extra resources they need during this difficult time.”
Caroline Bruckner, a professor at American University, noted in an email that the delay is helpful not only for people who owe but also for “low-income folks who rely on volunteer income tax assistance programs to do their taxes, many of which have been temporarily shut down."
Policymakers are encouraging taxpayers who are expecting a refund to file as soon as possible. IRS data through March 6 shows that almost 68 million Americans – roughly half of all filers based on previous years – have taken that advice. Nearly 53 million Americans (at least) have already gotten their refunds.
You can maximize your tax refund in several ways — from paying off high-interest debt to investing in a business or saving for retirement. One or more of these options could be the perfect fit for you.
The Schedule K-1 is slightly different depending on whether it comes from a trust, partnership or S corporation. Find out how to use this tax form to accurately report your information on your tax return.