Everyone knows the old saying: Time flies when you’re procrastinating.
Seems like only yesterday we were breezing past April 15 — the traditional deadline for income tax filing — and suddenly, the finish line looms again: Like a freight train heavy with overdue personal protective equipment, here comes July 15.
Where did the time go? … Oh, right. We were busy Zooming from home or applying for unemployment benefits while ordering face masks (or arguing their merits on social media), avoiding gatherings of more than a dozen, and scrubbing our hands raw — right up until we weren’t doing any of that, and instead were demonstrating in the streets by the thousands or crowding newly reopened beaches and bars.
There’s a lot to keep a person busy in the Age of Coronavirus, almost none of it having anything remotely to do with gathering your receipts, locating your 1099s, making late contributions to your IRA and HSA (great destinations for your stimulus check), and logging into your tax-prep software.
This just in: Time to redirect your focus.
Oh, sure, U.S. Treasury Sec. Steven Mnuchin, who ordered the original delay during the First Wave of our coronavirus frenzy on March 23, is dropping hints about an additional postponement, possibly in response to the urgings of conservative groups and at least one congressman.
“As of now, we’re not intending on doing that, but it is something that we may consider,” Mnuchin said during a June 23 interview at the Bloomberg Invest Global 2020 virtual summit. The tax deadline, he said, might be kicked back to Sept. 15.
May? Consider? Might? That’s a lot of uncertainty for the estimated 7 million-plus who, near the end of June, haven’t yet filed their 2019 returns.
So it all comes down to this, dear procrastinators: Are you willing to play chicken with the IRS? In short, do you feel lucky?
One way to manage the moment: Buy yourself some breathing room by filing for an automatic extension. By downloading, completing, and returning Form 4868 to the IRS — by mail or electronically — before midnight July 15, you won’t have to file your return until October 15. Your status as a confirmed procrastinator reaffirmed, you won’t have to worry about filling out forms until the stores and websites are once more festooned with Christmas decor.
One critical caveat: While Mnuchin’s postponement was for filing and paying, Form 4868 delays only the filing deadline. If nothing changes and you have taxes due, those must be paid (or a payment plan arranged) by July 15.
Moreover, if you live in one of the 43 states that collect income taxes, make certain you are in harmony with your state’s deadlines.
Are you someone who is owed a refund? This bizarre, unprecedented year, the news gets even better: The IRS is paying interest on refunds dating back to April 15. Even if you haven’t filed.
And it’s not just a pittance; our new friends at the scariest federal agency are paying an amicable 5% compounded daily on undelivered refunds through June 30, and 3% after that. That’s guaranteed money equal to several times the most generous savings deposit account.
Consider the irony. Taxpayers who filed early and already received their refunds lost out on interest payments. Those who’ve held out will benefit.
Believe it: In the Age of COVID-19, procrastination pays.
This, however, is not a recommendation to wait out Mnuchin. Stipulated, conditions are lining up in favor of another delay.
- New cases of COVID-19 are spiking at an alarming rate, especially among millennials, and some states (notably Texas and Florida) have modified their reopening orders.
- With a substantial portion of the IRS workforce devoted to Paycheck Protection Program and stimulus-check duties (including the attempted clawback of $1.4 billion paid to dead people), the processing of returns has been a low priority at the agency.
- The IRS’s taxpayer-help programs (Volunteer Income Tax Assistance [VITA] and Tax Counseling for the Elderly [TCE]) closed in spring, and will remain so indefinitely.
- Meanwhile, Congress and the White House are wrangling over another round of stimulus ahead of the July 31 end of bonus payments for the unemployed.
Nonetheless, those who haven’t filed will be doing themselves a substantial favor by preparing as though Mnuchin won’t flinch.
Despite the unique July 15 deadline, preparations for filing follow a familiar chart. Those who have used an online tax software in the past may be guided by that experience. Unless they haven’t already secured an appointment, that is. Tax preparers are reporting a crush to service last-minute filers; those who aren’t already on the calendar may have to consider other options … such as preparing them themselves.
On that note, we recommend taxpayers endure the rigors of the self-preparation process at least once in their lifetimes. Until you do, even with hand-holding tax software as your guide, you never will fully appreciate the brutal, byzantine elegance of the tax code.
And then what? If you are among those receiving something approaching the average refund ($2,767) — and your budget isn’t strapped by the coronavirus economy — you may well consider taking a bite out of your high-interest credit card debt.
Several months ago, during our blissful, fully employed, economy-surging, can’t-wait-for-tomorrow pre-coronavirus existence, Credit Card Insider found that applying their refund to debt was precisely what three-quarters of taxpayers had planned.
Spokesman Nathan Grant says that’s still a good idea.
“A lot of the same takeaways apply,” Grant says. “Paying down high-interest debt is one of the ways to use your refund to its best advantage.”
With uncertainty hounding the global economy — it’s not just COVID-19 anymore; social unrest has flared alongside a presidential campaign — now would be good time to focus on debt reduction, if only to give yourself some flexibility if your personal finances go south.
What if you owe the IRS? Think twice about charging a tax payment to a credit card — even a rewards card. For openers, the IRS doesn’t take credit card payments. And if you go through a pass-through company, you’ll pay a convenience fee that’s about equal to the reward.
Only if you have a new rewards card that pays a fat bonus for charging a big chunk in the first months should you consider paying taxes with a card, Grant advises.
If you’re in line for an interest-padded refund but even that won’t help you quell your debt concerns, consider consulting with a debt expert at a nonprofit credit counseling agency.
You’ll wind up tapping expertise that could help guide you out of a minor sag in your fortunes, or demonstrate that a debt management plan might be your best bet.
Either way, once your taxes are filed, you’ll know for certain the best, highest use for your (knock wood) refund.
And you won’t care one whit what Mnuchin does.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at firstname.lastname@example.org.
- Mercado, D. (2020, June 24) Treasury may consider delaying Tax Day to Sept. 15, Mnuchin says. Retrieved from https://www.cnbc.com/2020/06/24/treasury-may-consider-delaying-tax-day-beyond-july-15-mnuchin-says.html
- Rubin, R. (2020, June 24) IRS Will Pay Interest on Late Refunds — Even for Those Who Haven’t Filed Yet. Retrieved from https://www.wsj.com/articles/irs-will-pay-interest-on-late-refundseven-for-those-who-havent-filed-yet-11593024177
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