After the unprecedented year we endured in 2020, it’s good to know we are getting a little break. Ok, don’t hold your breath, because it isn’t as much of a break as it is the right thing to do, considering circumstances. Specifically, there are two things happening. First, the IRS allowed an extension of the tax deadline for filing and paying 2020 taxes. Yay! Second, the IRS has announced the 2021 HSA contribution limit. So, as you can see, we have some important things to discuss. Check out the details below!
Tax Deadline History
Most of us are well-versed on the significance of April 15. If you are a CPA, your blood pressure probably goes up just at the mention of this date. After all, it’s been the reigning tax filing deadline since 1955. So, there probably aren’t many people who remember paying taxes before April 15 became a thing!
Here’s a little-known fact, though: April 15 is not always the tax filing deadline. Sure, we know the date shifts to the following Monday if the 15th falls on a Saturday or Sunday. However, did you know April 16 is actually a federal holiday? That’s right! April 16 is Emancipation Day, commemorating the day Lincoln’s law freed the first slaves in Washington D.C. in 1862.
So, similar to the deadline shifting if the 15th lands on a weekend, the same thing happens if the 16th (Emancipation Day) falls on a Saturday or Monday. Thus, in Saturday’s case, the holiday would be celebrated on the business day prior, which would be Friday. Therefore, the deadline for filing taxes would be the upcoming Monday. If the 16th lands on a Monday, that is when the deadline would have been, due to the 15th landing on a Sunday. Since the holiday would then be on that Monday, the tax deadline would be postponed to Tuesday, accordingly. That’s easy to follow, right?
2020 Tax Deadline Extension
So, just as we were all comfortably luxuriating in the predictability of the April 15 tax deadline, the IRS pulled the rug out from under us and changed the tax deadline. Ok, perhaps that’s not the best way of describing what happened. In actuality, the COVID-19 pandemic landed us in a crisis. The IRS, hearing the cries of desperate American workers, felt merciful and extended the tax deadline in 2020 three full months. Thank you, IRS. (Have those words ever been uttered before?)
Now, we have made great strides economically and where the pandemic is concerned compared to where we were last year. However, many workers are still struggling, and many businesses are clamoring to return to some semblance of pre-COVID normalcy. Well, the IRS seems to be feeling charitable this year, which means there is another tax deadline extension. The official deadline for filing and paying 2020 taxes is Monday, May 17, 2021. True, this extension isn’t as generous as last year’s three-month grace period. However, a little of something is better than nothing, I suppose. Also, if you’re wondering why the deadline is such an odd number, remember our discussion about the 15th falling on a weekend or a holiday.
Details About Tax Deadline Extension
Ok, I bet you are wondering about the catch with the new deadline. I mean, do we ever get something for nothing? Well, the good news is that this tax deadline is really pretty legit. In other words, filing your taxes on May 17, instead of the usual April 15 date, will not pose any problems for you. For reassurance, here are some answers to common concerns related to the tax extension:
- First, there is no need to take action in order to file your taxes later than April 15. In other words, you don’t need to notify the IRS that you will be filing after the normal April 15 date. Instead, just file when you file (by the deadline, of course).
- Second, there will be no penalties or interest for filing by May 17. So, it’s not like the IRS is allowing people to file a month later, but with strings attached. No, the only real price you pay is the extension of your stress about filing (which is a bit of a price, now that I think about it!).
- Third, federal tax payments can also be postponed until May 17, regardless of how much a taxpayer owes. Therefore, this extension can allow taxpayers to hold on to their cash a little longer. Meaning, those tax payments are reaping dividends in high-interest accounts for an extra month (I wish!).
Despite the lack of consequences for filing a month later than usual, the IRS urges people to file as soon as possible for the before the deadline. After all, the closer you get to the deadline, the greater the risk of missing it. You do not want to miss the tax deadline!
Also, be sure to note that this tax deadline extension pertains to filing and paying federal taxes only. Thus, you should not delay any state filings or tax payments.
2021 HSA Contribution Limit
Besides the exciting news of the tax deadline extension for filing 2020 taxes, we also get to announce the 2021 HSA contribution limit! So many fun things to report– it’s hard to contain it all!
Don’t break out the confetti just yet, though, because the limit is only increasing by $50 for individuals. For families, the limit is increasing by $100. Check out the table below, which highlights contribution limits for covered individuals and families who qualify under a high-deductible health plan ($1,400 or more for individuals):
Of course, those who are age 55 and above may contribute up to $1,000 more per year as a catch-up contribution. Spouses may do the same thing, but in a separate HSA catch-up account.
Appreciate Increases and Extensions
In all seriousness, there is so much to be thankful for in 2021. While the 2021 HSA contribution limit increase might not be much to celebrate, it’s an increase, nonetheless. Also, we may only have one extra month to file federal taxes, but hey– that’s 30 days, or 720 hours! Think of all you could do with an extra 720 hours! So, keep your chin up and keep pressing on. Especially in 2021, keep looking for that silver lining in all the things.