While doing taxes might be the last thing on your mind, they’re an unavoidable part of life, and you must file them correctly.
Fortunately, this year the tax filing deadline for 2021 has been extended¹.
You’ll have more time to get your head around your taxes thanks to the IRS tax return deadline extension. The tax deadline shifted from April 15 to May 17 for this year.
If you’re a US citizen living abroad, or a non-citizen living in the US, you may want to consider using a Wise multi-currency account to pay your taxes.
Wise can work out much cheaper than sending the payment through your international bank.
While the deadline usually falls in the middle of April, in 2021, American taxpayers will now have until May 17 to file federal taxes.
The original due date for 2021 was April 15, but the IRS has shown leniency for the second year running by extending the deadline.
Even though the IRS pushed back the tax filing deadline, it’s still a good idea to get them done as soon as possible, so you won’t have to scramble to do your taxes as the deadline approaches.
While May 17 has now become an important tax deadline for 2021, there are still many others to keep track of throughout the year.
Here are some of the most important tax deadlines in 2021, including the returns associated with each:
- Fourth estimated tax payment for the 2020 tax year (IRS Form 1040)
- Partnership returns (IRS Form 1065)
- S-corporation returns (IRS Form 1120-S)
- Foreign partnership returns
- C-corporation income tax returns (IRS Form 1120)
- Trust, estate, and gift tax returns
- Non-resident alien returns
- Bequests and Gifts from Abroad (IRS Form 3520)
- First estimated tax payment for the 2021 tax year
- Individual income tax return (Form 1040) for the 2020 tax year
- Exempt organization return
- Single-owner llc tax filing deadline
- Second estimated tax payment for the 2021 tax year
- Individual tax returns for US citizens living abroad
- Third estimated tax payment for the 2021 tax year
- Final deadline for those who requested extension for 2020 individual and corporate tax returns for (Form 1040 and 1120)
|💡 If you need to pay taxes on bequests and gifts from abroad² or inheritance from overseas (from a country that is not under sanction³), then you may want to convert these earnings into USD. You can use Wise to avoid exchange rate markups and hidden fees.|
A good reason to file taxes early is to avoid the risk of submitting them after the deadline has passed.
There are no penalties for missing a deadline if you’re expecting a tax refund, but if you owe tax, the IRS will hit you with a failure to file penalty.
The IRS will fine you 5% of the unpaid tax, and you could face extra charges if you still haven’t filed your taxes two months after the initial date.
Try to avoid these penalty fees at all costs, as the minimum amount will be 100% of the tax required or $435, whichever sum turns out to be smaller.
If for whatever reason, you are unable to submit your tax returns in time for the deadline, don’t worry, there are a few things you can do.
The number one thing to do if you feel like you’re going to miss the tax deadline is to apply for a payment plan⁴. A payment plan will grant you an extension for filing your taxes with the IRS.
Bear in mind, though, that a payment plan request is just that - a request. For it to be successful, you will need the IRS to approve the payment plan.
There are fees and conditions associated with requesting a payment plan, depending on whether it’s short-term or long-term.
A short-term payment plan⁵ grants you an extra 180 days to file your taxes, but you can only request it online if you’re filing as an individual taxpayer.
A long-term payment plan⁶ is a more flexible option, though it will incur some fees, which will vary according to the application method. With this plan, you will be able to pay the amount you owe in monthly installments, and there are two options for doing so.
With the first option, you will pay via Direct Debit from your checking account, which is known as a Direct Debit Installment Agreement (DDIA).
The second option is available once you’ve applied for a long-term payment plan and gives you various methods of making monthly payments.
While it’s tempting to celebrate the news of the 2021 tax deadline extension, there are a lot of compelling reasons to file your return well in advance of the new May 17 deadline.
Here is a list of reasons to consider filing your taxes sooner rather than later
- Some taxes are still due on April 15
While the federal taxes deadline may have shifted to May 17, the date for estimated quarterly tax payments remains April 15. This may or may not affect you, depending on what state you live in.
For the last tax year, most states adjusted the estimated quarterly tax payment date to match the new federal tax deadline, so try to stay in the loop in your state.
- You could qualify for a stimulus payment
There’s a chance that by filing your taxes sooner rather than later, you could qualify for the most recent stimulus payment.
The latest stimulus payment is calculated according to your 2020, so if you noticed a decrease in income that year, you should file your taxes as soon as possible to give yourself a chance of receiving the payment sooner.
- You will have more time to make sure you filed correctly
One of the main reasons to do anything early is to give yourself more time.
If you have more time, you are more likely to notice any mistakes and provide any additional information if necessary. You give yourself the luxury of speaking with your tax consultant about any deductions you may be eligible for and anything else you might have missed out.
- You could receive a refund faster
If you think you’re due a refund on your taxes, there’s no reason to wait - apply as soon as possible to receive it earlier. You can then use this money you get from the refund to pay off debt or add to savings to accrue interest on it.
Plus, in the case that you might owe more money for taxes in the immediate future, you can use the refund money to this end.
- You can make contributions to an IRA or HSA
As of right now, April 15 is still set to be the last day you can contribute to an IRA or HSA for the 2020 tax year.
You can find out more about IRAs in this smart and simple guide to IRAs.
While the IRS might extend the deadline to line up with the new tax return deadline in May, there’s no guarantee. As such, check to see if it’s worth your time to invest in one of these accounts before the initial deadline rolls around.
Getting your head around taxes can be a nightmare, but paying them shouldn’t cost you even more money. If you are paying your taxes from overseas with a non-US bank account, you can use Wise to get the real mid-market rate (the one you see on Google).
A Wise account can reduce the costs of paying from abroad. You can save 4-5% compared to typical banks.
- IRS - Tax deadline extended
- IRS - Bequests and gifts from abroad
- OFAC - Sanctions program
- IRS - Payment plan
- IRS - Short tern payment plan
- IRS - Long term payment plan
All sources checked 8 April 2021
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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